8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 2, 2005

BMC SOFTWARE, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE	001-16393	74-2126120
(State of Incorporation)	(Commission File Number)	(I.R.S. Employer
		Identification Number)

2101 CITYWEST BLVD.
HOUSTON, TEXAS	77042-2827
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 918-8800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 204.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

     The information in this Current Report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

ITEM 2.02. Results of Operations and Financial Condition

     On August 2, 2005, BMC Software, Inc. (the “Company”) issued a press release announcing financial results for its fiscal first quarter ended June 30, 2005. A copy of the press release, dated as of August 2, 2005, is furnished as Exhibit 99 to this Current Report.

ITEM 9.01. Financial Statements and Exhibits

(c) The following exhibit is being furnished herewith:

99 News Release, dated August 2, 2005, of BMC Software, Inc.

2

SIGNATURE

     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 hereunto duly authorized.

Date: August 2, 2005

BMC SOFTWARE, INC.
By:	/s/ ROBERT H. WHILDEN, JR.
	Robert H. Whilden, Jr.
	Senior Vice President, General Counsel and Secretary

3

EXHIBIT INDEX

Exhibit No.
99	News Release, dated August 2, 2005, of BMC Software, Inc.

4

EX-99

FOR IMMEDIATE RELEASE

Investor Relations Contact:	Media Relations Contact:
Steve Solcher (713) 918-4329 steve_solcher@bmc.com	Jessica Walker (713) 918-4482 jessica_walker@bmc.com

BMC Software Announces Fiscal 2006 First Quarter Results
Company Reports Non-GAAP Earnings per Share Above Consensus and Improved Non-GAAP Operating
Margin, Raises Guidance for Fiscal 2006

     HOUSTON — (August 2, 2005) — BMC Software, Inc. [NYSE: BMC] today announced financial results for its first quarter of fiscal 2006 ended June 30, 2005. Quarterly results were positively impacted by revenue growth across all business lines and by ongoing cost and expense management, as well as the immediate cost savings impact from the Company’s restructuring.

     BMC Software’s non-GAAP net earnings, which exclude special items, assuming an effective tax rate of 28%, for the first quarter of fiscal 2006 were $43.9 million, or $0.20 per diluted common share which is up 39% compared to the year ago quarter. Consensus estimates for fiscal 2006 first quarter were $0.13 per share. Fiscal 2006 first quarter net loss on a GAAP basis was $41.1 million, a loss of $0.19 per share. The difference between non-GAAP and GAAP earnings per share was primarily due to approximately $0.17 per share for the taxes associated with the repatriation of foreign earnings and $0.14 per share for restructuring charges. Included in the financial tables is a complete reconciliation between non-GAAP and GAAP results.

     Total revenues for the first quarter of fiscal 2006 were $348.3 million. Non-GAAP operating expenses, which exclude $66.3 million in special items, were $304.9 million. Cash flows from operations in the first quarter were $94.7 million, including the cash impact related to the restructuring. Non-GAAP operating margin for the quarter was 12%, a four percentage point increase over the prior year. The Company continues to maintain a strong balance sheet, ending the first quarter of fiscal 2006 with a record $1.3 billion of cash and marketable securities and a record $1.6 billion in deferred revenues.

     “This was a strong quarter for BMC as our customers continued to respond favorably to our Business Service Management (BSM) solutions,” said Bob Beauchamp, president and CEO, BMC Software. “Despite a competitive environment, our implementation of a major restructuring and the reallocation of sales resources to growth businesses, we sharpened our focus and significantly improved our operating margin. The growth in profitability of our business is indicative of the value of these initiatives.”

TABLE OF CONTENTS

BMC Software First Quarter Results/Page 2

     License bookings in the first quarter of fiscal 2006 were $99.6 million, an increase of 19% compared to the year ago quarter. The following table illustrates license bookings:

First Quarter FY06 Business Segment Results

											License
($ Millions)	License		Net Change in			License		License Bookings			Bookings
	Revenues		Deferred License			Bookings*		Percent Growth vs.			Percent Growth
			Revenue					Q1FY05			vs. Q4FY05
DM – Mainframe		31.1		(3.6	)		27.5		67	%		(49	%)
MAINVIEW®		8.9		(1.7	)		7.2		32	%		(54	%)
Mainframe Management		40.0		(5.3	)		34.7		58	%		(50	%)
Scheduling & Output Mgmt.		12.6		(1.5	)		11.1		24	%		(53	%)
DM – Distributed Systems		5.1		(1.9	)		3.2		(55	%)		(82	%)
PATROL®		19.3		(4.5	)		14.8		(13	%)		(48	%)
Distributed Systems Mgmt.		37.0		(7.9	)		29.1		(12	%)		(58	%)
Service Management		34.8		(1.2	)		33.6		19	%		(36	%)
Identity Management		2.0		0.8			2.8		170	%		(8	%)
Total BMC		113.9		(14.3	)		99.6		19	%		(49	%)

Due to the exclusion of the non-material category of “Other,” all totals do not sum.

*License bookings measure the value of new license contracts signed during the quarter, including both the amount that goes to the income statement and the amount that goes to the deferred license revenue account on the balance sheet. License bookings can be calculated by adding license revenues and the net change in the deferred license revenue balance.

     Revised Fiscal 2006 Guidance

     The Company expects second quarter revenues to be in the $355 to $370 million range, and non-GAAP earnings per share, which exclude approximately $0.08 per share of special items, to be in the $0.20 to $0.25 per share range.

     The Company is raising its previous estimates for fiscal 2006. The Company expects fiscal 2006 non-GAAP earnings per share, which exclude special items, to be in the $0.90 to $0.96 per share range (previously estimated at $0.86 to $0.92 per share) on estimated revenues of $1.49 to $1.52 billion (previously estimated at $1.48 to $1.50 billion). Fiscal 2006 estimates exclude an estimated $0.57 per share of amortization of acquired technology and intangibles, exit costs due to the Company’s restructuring and taxes associated with the repatriation of foreign earnings.

BMC Software First Quarter Results/Page 3

     BMC Software continues to expect cash flows from operations for fiscal 2006 to exceed $500 million even after an estimated $45 million in cash outlays associated with the restructuring.

     Conference Call

     A conference call to discuss first quarter fiscal 2006 results is scheduled for today, August 2, 2005 at 4:00 p.m. Central time. Those interested in participating may call (719) 457-2633 and use the passcode BMC. To access a replay of the conference call, which will be available for one week, dial (719) 457-0820 and use the passcode BMC. A live webcast of the conference call will be available on the company’s website at www.bmc.com/investors. A replay of the webcast will be available within 24 hours and archived on the website.

     Non-GAAP Financial Measures

     This press release includes the non-GAAP financial measures of net earnings, diluted earnings per share, operating expenses and operating margin excluding charges for (i) restructuring costs, (ii) taxes associated with the repatriation of foreign earnings, (iii) amortization of acquired technology and intangibles, (iv) acquired research and development and (v) impairment of goodwill. Restructuring costs and taxes associated with the repatriation of foreign earnings are excluded, as management believes these to be non-recurring costs which would distort comparisons with historical results if not excluded. The other items are excluded, as they are non-cash charges related to completed acquisitions. The non-GAAP financial measures of net earnings and diluted earnings per share are also adjusted to reflect an effective tax rate of 28%, which differs from the GAAP rate. We have applied a standard 28% tax rate to normalize our results against historical reported results. A reconciliation between the GAAP results and the non-GAAP results excluding these items is included with the financial tables accompanying this press release.

     BMC Software’s management uses both GAAP and non-GAAP results in its evaluation of the performance of the Company; although, the non-GAAP results are used for budgeting and for determining executive compensation on a quarterly basis.

     While GAAP results are more comprehensive, the Company provides investors supplemental non-GAAP measures and the reconciliation of non-GAAP to GAAP information to provide additional insight into BMC Software’s financial results. Because non-GAAP gauges are not influenced by certain non-cash or non-recurring expenses, they can add value by focusing on the

BMC Software First Quarter Results/Page 4

ongoing performance of the Company’s core operations and by giving investors additional options for tracking historical and expected results.

     About BMC Software

     BMC Software, Inc. [NYSE:BMC] is a leading provider of enterprise management solutions that empower companies to manage their IT infrastructure from a business perspective. Delivering Business Service Management, BMC Software solutions span enterprise systems, applications, databases and service management. Founded in 1980, BMC Software has offices worldwide and fiscal 2005 revenues of more than $1.46 billion. For more information about BMC Software, visit www.bmc.com.

     This news release contains both historical information and forward-looking information. Statements of plans, objectives, strategies and expectations for future operations and results, identified by words such as “believe,” “anticipate,” “expect,” “estimate” and “guidance” are forward-looking statements. Numerous important factors affect BMC Software’s operating results and could cause BMC Software’s actual results to differ materially from the forecasts and estimates indicated by this press release or by any other forward-looking statements made by, or on behalf of, BMC Software, and there can be no assurance that future results will meet expectations, estimates or projections. These factors include, but are not limited to, the following: 1) BMC Software’s revenues and earnings are subject to a number of factors, including the significant percentage of quarterly sales typically closed at the end of each quarter, that make estimation of operating results prior to the end of a quarter extremely uncertain; 2) BMC Software’s operating costs and expenses are relatively fixed over the short term; 3) increased competition and pricing pressures could adversely affect BMC Software’s earnings; 4) BMC Software’s maintenance revenue could decline if maintenance renewal rates decline or if license revenues do not grow; 5) new software products and product strategies may not be timely introduced or successfully adopted; 6) BMC Software’s quarterly cash flow from operations is and has been volatile and is dependent upon a number of factors described in BMC Software’s filings with the SEC; 7) BMC Software’s effective tax rate is subject to quarterly fluctuation and any change in such tax rate could affect the company’s earnings; and 8) the additional risks and important factors described in BMC Software’s quarterly reports on Form 10-Q and in its Annual Report on Form 10-K for the fiscal year ended March 31, 2005 and other filings with the SEC. BMC Software undertakes no obligation to update information contained in this release.

###

BMC Software, the BMC Software logos, and all other BMC Software product or service names are registered trademarks or trademarks of BMC Software, Inc. © 2005, BMC Software, Inc. All rights reserved.

Page 5

BMC SOFTWARE, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS


(Unaudited)

	Three Months Ended
	June 30,
	Fiscal		Fiscal			Percentage
	2005		2006			Change
	(In millions, except
	per share data)
Revenues:
License	$	100.3	$	113.9			14	%
Maintenance		204.8		213.6			4	%
Professional services		20.9		20.8			—
Total revenues		326.0		348.3			7	%
Cost of license revenues		30.6		33.3			9	%
Cost of maintenance revenues		44.9		45.8			2	%
Cost of professional services		20.5		23.3			14	%
Selling and marketing expenses		124.7		144.2			16	%
Research and development expenses		47.2		56.2			19	%
General and administrative expenses		41.2		59.4			44	%
Amortization of intangible assets		4.2		9.0			114	%
Total operating expenses		313.3		371.2			18	%
Operating income (loss)		12.7		(22.9	)		(280	)%
Other income, net		17.6		17.6			—
Earnings (loss) before income taxes		30.3		(5.3	)		(117	)%
Income tax provision (benefit)		19.6		35.8			83	%
Net earnings (loss)	$	10.7	$	(41.1	)		(484	)%
Diluted earnings (loss) per share	$	0.05	$	(0.19	)		(494	)%
Shares used in computing diluted earnings (loss) per share		225.1		219.6			(2	)%

Page 6

BMC SOFTWARE, INC. AND SUBSIDIARIES
NON-GAAP STATEMENTS OF OPERATIONS EXCLUDING SPECIAL ITEMS


(Unaudited)

	Three Months Ended
	June 30,
	Fiscal		Fiscal		Percentage
	2005		2006		Change
	(In millions, except
	per share data)
Revenues:
License	$	100.3	$	113.9		14	%
Maintenance		204.8		213.6		4	%
Professional services		20.9		20.8		—
Total revenues		326.0		348.3		7	%
Cost of license revenues		19.1		17.9		(6	)%
Cost of maintenance revenues		45.9		42.8		(7	)%
Cost of professional services		20.5		20.1		(2	)%
Selling and marketing expenses		124.0		118.2		(5	)%
Research and development expenses		48.3		52.5		9	%
General and administrative expenses		41.2		53.4		30	%
Total operating expenses		299.0		304.9		2	%
Operating income		27.0		43.4		61	%
Other income, net		17.6		17.6		—
Earnings before income taxes		44.6		61.0		37	%
Income tax provision		12.5		17.1		37	%
Net earnings	$	32.1	$	43.9		37	%
Diluted earnings per share	$	0.14	$	0.20		39	%
Shares used in computing diluted earnings per share		225.1		221.0		(2	)%

See the accompanying Supplemental Analysis of Effect of Special Items, where these Non-GAAP Statements of Operations Excluding Special Item are reconciled to the Statements of Operations prepared in accordance with U.S. generally accepted accounting principles.

Page 7
BMC SOFTWARE, INC. AND SUBSIDIARIES
BALANCE SHEETS
(Unaudited)

	March 31,		June 30,
	2005		2005
	(In millions)
Current assets:
Cash and cash equivalents	$	820.1	$	853.7	(a)
Marketable securities		108.7		115.1	(a)
Trade accounts receivable, net		191.8		120.3
Current trade finance receivables, net		151.8		127.7
Other current assets		168.0		166.9
Total current assets		1,440.4		1,383.7
Property and equipment, net		383.7		366.2
Software development costs and related assets, net		126.1		118.5
Long-term marketable securities		354.3		327.1	(a)
Long-term finance receivables, net		126.1		94.3
Acquired technology, goodwill and intangibles, net		687.9		661.6
Other long-term assets		179.8		180.1
	$	3,298.3	$	3,131.5
Current liabilities:
Accounts payable and accrued liabilities	$	320.8	$	265.0
Current portion of deferred revenue		764.3		777.0
Total current liabilities		1,085.1		1,042.0
Long-term deferred revenue		868.0		858.2
Other long-term liabilities		83.4		79.7
Total stockholders’ equity		1,261.8		1,151.6
	$	3,298.3	$	3,131.5

(a) Total cash and marketable securities are $1,295.9 at June 30, 2005

Page 8

BMC SOFTWARE, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	June 30,
	Fiscal			Fiscal
	2005			2006
	(In millions)
Cash flows from operating activities:
Net earnings (loss)	$	10.7		$	(41.1	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		49.5			59.3
Provision for uncollectible Trade and Financed Receivables		(2.8	)		2.5
(Gain) loss on marketable securities		2.1			(0.8	)
Earned portion of stock-based compensation		0.3			0.8
Decrease in finance receivables		65.9			55.5
Decrease in payables to third-party financing institutions for finance receivables		(18.3	)		(15.5	)
Increase in accrued exit costs		—			8.7
Net change in trade receivables, payables and other components of working capital		(17.3	)		25.3
Net cash provided by operating activities		90.1			94.7
Cash flows from investing activities:
Cash paid for technology acquisitions and other investments, net of cash acquired		(4.8	)		(3.3	)
Purchases of marketable securities		(8.4	)		(7.3	)
Proceeds from maturities/sales of marketable securities		149.7			30.9
Proceeds from sale of property and equipment					5.0
Purchases of property and equipment		(16.8	)		(6.2	)
Capitalization of software development costs and related assets		(14.2	)		(10.9	)
Net cash provided by investing activities		105.5			8.2
Cash flows from financing activities:
Payments on capital leases		(1.0	)		(1.4	)
Stock options exercised and other		4.9			16.9
Treasury stock acquired		(20.0	)		(86.0	)
Net cash used in financing activities		(16.1	)		(70.5	)
Effect of exchange rate changes on cash		(2.6	)		1.2
Net change in cash and cash equivalents		176.9			33.6
Cash and cash equivalents, beginning of period		612.3			820.1
Cash and cash equivalents, end of period	$	789.2		$	853.7

Page 9

BMC SOFTWARE, INC. AND SUBSIDIARIES
SUPPLEMENTAL ANALYSIS OF EFFECT OF SPECIAL ITEMS

(Unaudited)

	Three Months Ended June 30, 2004							Three Months Ended June 30, 2005
			Special			Non-GAAP, Excluding					Special			Non-GAAP, Excluding
	As Reported		Items			Special Items		As Reported			Items			Special Items
Revenues:
License	$	100.3	$	—		$	100.3	$	113.9		$	—		$	113.9
Maintenance		204.8		—			204.8		213.6			—			213.6
Professional services		20.9		—			20.9		20.8			—			20.8
Total revenues		326.0		—			326.0		348.3			—			348.3
Cost of license revenues		30.6		(11.5) (a,b	)		19.1		33.3			(15.4) (a,b	)		17.9
Cost of maintenance revenues		44.9		1.0	(a)		45.9		45.8			(3.0)	(a)		42.8
Cost of professional services		20.5		—			20.5		23.3			(3.2)	(a)		20.1
Selling and marketing expenses		124.7		(0.7	) (a)		124.0		144.2			(26.0	) (a)		118.2
Research and development expenses		47.2		1.1	(a)		48.3		56.2			(3.7)	(a)		52.5
General and administrative expenses		41.2		—			41.2		59.4			(6.0)	(a)		53.4
Amortization of intangible assets		4.2		(4.2)	(b)		—		9.0			(9.0)	(b)		—
Total operating expenses		313.3		(14.3	)		299.0		371.2			(66.3	)		304.9
												aaaaaaaaaaaaa aa
Operating income (loss)		12.7		14.3			27.0		(22.9	)		66.3			43.4
Other income, net		17.6		—			17.6		17.6			—			17.6
Earnings (loss) before income taxes		30.3		14.3			44.6		(5.3	)		66.3			61.0
Income tax provision (benefit)		19.6		(7.1) (d,e	)		12.5		35.8			(18.7) (c,d	)		17.1
Net earnings (loss)	$	10.7	$	21.4		$	32.1	$	(41.1	)	$	85.0		$	43.9
Diluted earnings (loss) per share	$	0.05	$	0.10	(f)	$	0.14	$	(0.19	)	$	0.38	(f)	$	0.20
Shares used in computing diluted earnings (loss) per share		225.1		225.1			225.1		219.6			221.0			221.0
(a) Exit costs and related charges				1.8								(43.1	)
(b) Amortization of acquired technology & intangibles				(16.1	)							(23.2	)
(c) Income tax provision for earnings to be repatriated				—								(36.4	)
(d) Tax effect of special items and adjustment to effective tax rate of 28%				4.0								17.7
(e) Release of tax accrual related to IRS settlement				(11.1	)							—
(f) Due to rounding, EPS does not sum across

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