-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nay3ol94VFJ4XOtsVO6uxSCm6oXED4q/QAvgszz8VJt0xYexRN5+gGGiGoGwwnzF qkfkOUQ4cZzTwk9AgxFPPg== 0000950129-99-000684.txt : 19990225 0000950129-99-000684.hdr.sgml : 19990225 ACCESSION NUMBER: 0000950129-99-000684 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BMC SOFTWARE INC CENTRAL INDEX KEY: 0000835729 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 742126120 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-17136 FILM NUMBER: 99548188 BUSINESS ADDRESS: STREET 1: 2101 CITYWEST BLVD CITY: HOUSTON STATE: TX ZIP: 77042-2827 BUSINESS PHONE: 7139188800 MAIL ADDRESS: STREET 1: 2101 CITYWEST BLVD CITY: HOUSTON STATE: TX ZIP: 77042-2827 10-Q/A 1 BMC SOFTWARE, INC. - DATED 12/31/98 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A Amendment No. 1 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 OR [ ] 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 0-17136 BMC SOFTWARE, INC. (Exact name of registrant as specified in its charter) Delaware 74-2126120 (State or other jurisdiction of (IRS Employer identification No.) incorporation or organization) BMC Software, Inc. 2101 CityWest Boulevard Houston, Texas 77042 (Address of principal executive officer) (Zip Code) Registrant's telephone number including area code: (713)918-8800 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 [X] No [ ] As of February 10, 1999, there were outstanding 217,059,000 shares of Common Stock, par value $.01, of the registrant. 2 BMC SOFTWARE, INC. AND SUBSIDIARIES Quarter Ended December 31, 1998 The Registrant hereby amends the Form 10-Q for the quarterly period ended December 31, 1998. This amendment is the result of an acquisition of BGS Systems, Inc. (BGS) which had been accounted for as an immaterial pooling of interests transaction for which prior periods were not restated to reflect BGS operations in the Registrant's Form 10-Q for the quarterly period ended December 31, 1998. The restatement resulted from a change in the Registrant's evaluation of the materiality of BGS's results of operations and financial position relative to the Registrant's prior period financial statements. INDEX
Page ---- PART I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements 3 Condensed Consolidated Balance Sheets December 31, 1998 (Unaudited) and March 31, 1998 3 Condensed Consolidated Statements of Earnings Three months and nine months ended December 31, 1997 and 1998 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows Nine months ended December 31, 1997 and 1998 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 SIGNATURES 24 ----------
2 3 Part I. FINANCIAL INFORMATION Item 1. Financial Statements BMC SOFTWARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, ASSETS 1998 1998 ---- ---- (Unaudited) Current assets: Cash and cash equivalents $ 72,093 $ 123,070 Investment securities 56,174 66,569 Trade accounts receivable, net 170,778 218,443 Income tax receivable 40,805 22,127 Prepaid expenses and other 34,028 34,765 ---------- ---------- Total current assets 373,878 464,974 Property and equipment, net 162,996 224,396 Software development costs, net 63,475 86,686 Purchased software, net 32,063 33,287 Investment securities 587,806 835,336 Deferred charges and other assets 28,277 50,187 ---------- ---------- $1,248,495 $1,694,866 ========== ==========
See accompanying notes to condensed consolidated financial statements. 3 4 BMC SOFTWARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (continued)
March 31, December 31, LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1998 ---- ---- (Unaudited) Current liabilities: Trade accounts payable $ 11,361 $ 12,556 Accrued liabilities and other 81,352 118,191 Current portion of deferred revenue 242,821 300,385 ----------- ----------- Total current liabilities 335,534 431,132 Long-term Liabilities: Deferred revenue 110,350 160,247 Other long-term liabilities 43,454 48,207 ----------- ----------- Total long-term liabilities 153,804 208,454 ----------- ----------- Total liabilities 489,338 639,586 Stockholders' equity: Common stock 2,101 2,173 Additional paid-in capital 129,098 110,719 Retained earnings 729,925 962,975 Foreign currency translation adjustment (1,543) (1,298) Unrealized gain on securities available for sale 3,179 7,007 ----------- ----------- 862,760 1,081,576 Less treasury stock 99,513 19,957 Less unearned portion of restricted stock compensation 4,090 6,339 ----------- ----------- Total stockholders' equity 759,157 1,055,280 ----------- ----------- $ 1,248,495 $ 1,694,866 =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 5 BMC SOFTWARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, ------------------------ ------------------------- 1997 1998 1997 1998 ---- ---- ---- ---- Revenues: Licenses $151,680 $205,236 $382,891 $532,241 Maintenance 60,347 78,171 174,542 212,669 -------- -------- -------- -------- Total revenues 212,027 283,407 557,433 744,910 -------- -------- -------- -------- Operating expenses: Selling and marketing 57,448 78,457 157,633 213,005 Research and development 28,558 33,786 75,084 101,440 Cost of maintenance services and product licenses 21,792 27,832 64,658 76,624 General and administrative 16,596 21,688 42,373 53,278 Acquired research and development costs -- -- 65,473 17,304 -------- -------- -------- -------- Total operating expenses 124,394 161,763 405,221 461,651 -------- -------- -------- -------- Operating income 87,633 121,644 152,212 283,259 Other income 7,978 13,102 21,471 35,732 -------- -------- -------- -------- Earnings before taxes 95,611 134,746 173,683 318,991 Income taxes 28,009 35,034 67,171 85,918 -------- -------- -------- -------- Net earnings $ 67,602 $ 99,712 $106,512 $233,073 ======== ======== ======== ======== Basic earnings per share $ .32 $ .46 $ .51 $ 1.08 ======== ======== ======== ======== Shares used in computing basic earnings per share 210,773 216,133 210,301 215,111 ======== ======== ======== ======== Diluted earnings per share $ .31 $ .44 $ .48 $ 1.02 ======== ======== ======== ======== Shares used in computing diluted 221,640 228,300 224,132 228,035 earnings per share ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 5 6 BMC SOFTWARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Nine Months Ended December 31, 1997 1998 ---- ---- Cash flows from operating activities: Net earnings (loss) $ 106,512 $ 233,073 Adjustments to reconcile net earnings to net cash provided by operating activities: Acquired research and development costs 65,473 17,304 Depreciation and amortization 44,996 49,628 Net change in receivables, payables and other items (12,843) 108,302 --------- --------- Total adjustments 97,626 175,234 --------- --------- Net cash provided by operating activities 204,138 408,307 --------- --------- Cash flows from investing activities: Technology acquisitions, net of cash acquired (72,044) (6,638) Purchased software and related assets (2,480) (4,661) Capital expenditures (50,494) (78,710) Capitalization of software development (28,521) (46,350) Purchases of securities held to maturity (71,837) (293,802) Proceeds from securities held to maturity 69,149 39,705 Increase in long-term finance receivables (9,181) (24,897) -------- --------- Net cash used in investing activities (165,408) (415,353) -------- ========= Cash flows from financing activities: Income tax reduction relating to stock options 27,473 38,035 Stock options exercised and other 17,997 19,743 Treasury stock acquired (70,703) -- Dividends paid (5,661) -- --------- --------- Net cash used in financing activities (30,894) 57,778 -------- --------- Effect of exchange rate changes on cash (840) 245 -------- --------- Net change in cash and cash equivalents 6,996 50,977 Cash and cash equivalents at beginning of period 89,790 72,093 --------- --------- Cash and cash equivalents at end of period $ 96,786 $ 123,070 ========= ========= Supplemental disclosure of cash flow information: Cash paid for income taxes $ 39,245 $ 15,774
See accompanying notes to condensed consolidated financial statements. 6 7 BMC SOFTWARE, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Note 1 - Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of BMC Software, Inc. and its wholly owned subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the Company's annual audited financial statements for the year ended March 31, 1998, as filed with the Securities and Exchange Commission (SEC) on Form 10-K. Note 2 - Earnings Per Share The Company presents its earnings per share in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128 requires dual presentation of earnings per share (EPS); basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of this calculation, outstanding stock options and unearned restricted stock are considered common stock equivalents using the treasury stock method. Note 3 - Stock Split On April 20, 1998, the Company's board of directors declared a two-for-one stock split. The stock split was effected in the form of a stock dividend. The stockholders of record received one share of common stock for each share held. All stock related data in the condensed consolidated financial statements and related notes reflect this stock split for all periods presented. 7 8 BMC SOFTWARE, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Note 4 - Comprehensive Income In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 requires the presentation of a Comprehensive Income Statement that is to be presented with other general financial statements. This statement is effective for the Company's fiscal year end 1999. The following table sets forth the calculation of comprehensive income for the following periods:
Three Months Ended Nine Months Ended December 31, December 31, (in thousands) (in thousands) 1997 1998 1997 1998 ---- ---- ---- ---- Net earnings $ 67,602 $ 99,712 $ 106,512 $ 233,073 Foreign currency translation Gains/(losses) (163) (63) (163) 245 Unrealized gain/(loss) on securities Available for sale (1,479) 482 1,832 3,828 --------- --------- --------- --------- Total comprehensive income $ 65,960 $ 100,131 $ 108,181 $ 237,146 ========= ========= ========= =========
Note 5 - Accounting for Derivative Instruments and Hedging Activities In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement also requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that the Company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for the Company at the beginning of its fiscal year 2000; however the Company will adopt SFAS No. 133 beginning January 1, 1999. One of the Company's principal hedging activities is to purchase foreign currency option contracts to hedge anticipated revenue transactions. Upon adopting SFAS No. 133, the Company will record a charge of $1.5 million, net of tax, as a cumulative effect of an accounting change and reduce deferred option premiums by approximately $1 million. The Company will report the option contracts at fair value each reporting period and the change in the intrinsic value of such contracts will be reported as other comprehensive income. The change in intrinsic value will be reported as the market value changes in the contract occur. Accordingly, the effect could increase the volatility of earnings and other comprehensive income. Note 6 - Pending Merger On November 2, 1998, the Company announced its agreement to merge with Boole & Babbage, Inc. (Boole) (the Merger) through an exchange of common stock and stock options using an exchange rate of .675 shares of BMC Software common stock for each share of Boole common stock. The Company expects to account for this transaction using the pooling of interests method. The Merger is subject to approval by the Boole stockholders and review by the SEC. 8 9 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition This section of the Form 10-Q includes historical information for the periods covered, certain forward looking information and the information provided below under the heading "Certain Risks and Uncertainties that Could Affect Future Operating Results" about certain risks and uncertainties that could cause the Company's future operating results to differ from the results indicated by any forward looking statements made by the Company or others. It is important that the historical discussion below be read together with the attached consolidated financial statements and notes thereto, with the discussion of such risks and uncertainties and with the audited financial statements and notes thereto, and the Management's Discussion and Analysis of Results of Operations and Financial Condition, contained in the Company's Form 10-K for fiscal 1998. A. RESULTS OF OPERATION AND FINANCIAL CONDITION The following table sets forth, for the periods indicated, the percentages that selected items in the Condensed Consolidated Statements of Earnings bear to total revenues. These comparisons of financial results are not necessarily indicative of future results.
Percentage of Total Revenues ---------------------------- Three Months Ended Nine Months Ended December 31, December 31, ------------ ------------ 1997 1998 1997 1998 ---- ---- ---- ---- Revenues: License 71.5% 72.4% 68.7% 71.5% Maintenance 28.5 27.6 31.3 28.5 ----- ----- ----- ----- Total revenues 100.0 100.0 100.0 100.0 Operating expenses: Selling and marketing 27.1 27.7 28.3 28.6 Research and development 13.5 11.9 13.5 13.6 Cost of maintenance services and product licenses 10.3 9.8 11.6 10.3 General and administrative 7.8 7.7 7.6 7.2 Acquired research and development costs -- -- 11.7 2.3 ----- ----- ----- ----- Operating income 41.3 42.9 27.3 38.0 Other income 3.8 4.6 3.9 4.8 ----- ----- ----- ----- Earnings before taxes 45.1 47.5 31.2 42.8 Income taxes 13.2 12.3 12.1 11.5 ----- ----- ----- ----- Net earnings 31.9% 35.2% 19.1% 31.3% ===== ===== ===== =====
9 10 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued)
REVENUES Three Months Ended Nine Months Ended December 31, December 31, ------------ ------------ (in thousands) (in thousands) 1997 1998 Change 1997 1998 Change ---- ---- ------ ---- ---- ------ North American license revenues $ 92,244 $ 124,221 35% $ 250,875 $ 347,473 39% International license revenues 59,436 81,015 36% 132,016 184,768 40% --------- --------- ------ --------- --------- ------ Total license revenues 151,680 205,236 35% 382,891 532,241 39% Maintenance revenues 60,347 78,171 30% 174,542 212,669 22% --------- --------- ------ --------- --------- ------ Total revenues $ 212,027 $ 283,407 34% $ 557,433 $ 744,910 34% ========= ========= ====== ========= ========= ======
Product Line Revenues The Company's products for the IBM OS/390 mainframe environment accounted for 67% and 69% of total revenues in the quarters ended December 31, 1997 and 1998, and 74% and 73% of total revenues, respectively, in the nine-month periods ended December 31, 1997 and 1998. The database utilities and administrative tools for IBM's IMS and DB2 database management systems comprise the largest portion of the Company's mainframe-based revenues and total revenues. These product lines accounted for 52% of both total revenues and license revenues in the quarter ended December 31, 1998 and 55% of both total and license revenues in the nine-month period ended December 31, 1998. Total revenues and license revenues from these product lines grew 43% and 56%, respectively, in the third quarter of fiscal 1999, and grew 33% and 44%, respectively, in the nine-month period of fiscal 1999 compared to the prior year period. The Company's other products for the OS/390 mainframe environment contributed 17% of total revenues and 15% of license revenues for the quarter ended December 31, 1998 and contributed 18% and 16% of total and license revenues, respectively, in the nine-month period ended December 31, 1998. Total revenues and license revenues for these other mainframe products grew 26% and 38%, respectively, in the third quarter of fiscal 1999 and grew 29% and 50% in the nine-month period of fiscal 1999. The Company's distributed systems product lines comprise the PATROL application and database management solutions, the Best/1 performance management products, the PATROL DB database administration products and the Company's high-performance database backup and recovery solutions. In total, these product lines contributed 33% and 31% of total revenues for the quarters ended December 31, 1997 and 1998, respectively, and 40% and 33% of license revenues for the same periods. In the nine months ended December 31, 1997 and 1998, these product lines contributed 26% and 27% of total revenues and 32% and 29% of license revenues, respectively. Total distributed systems revenues grew 24% and license revenues grew 11% in the third quarter of fiscal 1999, and 39% and 26%, respectively, for the nine-months ended December 31, 1998. 10 11 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) License Revenues The Company's license revenues include product license fees and capacity-based license upgrade fees. Product license fees are generated from the initial licensing of a product and subsequent licenses purchased under the Company's per copy, central processing unit ("CPU") tier-based licensing program. Product license fees also include fees associated with the initial licensing of a product on an aggregate processing capacity measured on a millions of instructions per second ("MIPS") basis. Capacity-based license upgrade fees are charged when a customer acquires the right to run an already licensed product on additional processing capacity, as measured by a CPU tier or by MIPS. These license upgrade fees have, to date, been generated almost exclusively by the Company's mainframe products. These fees include fees associated with customers' licensing of products for current processing capacity and/or anticipated future processing capacity. The Company's North American operations generated 61% of total license revenues in the quarters ended December 31, 1997 and 1998, 66% and 65% of total license revenues in the nine-month periods ending on such dates. The 35% growth in North American license revenues in the third quarter of fiscal 1999 over the third quarter of fiscal 1998 was principally derived from increased capacity-based license upgrade fees of the Company's mainframe products. For the nine months ended December 31, 1998, the 39% increase in North American license revenues over the comparable prior year nine-month period is primarily attributable to increased capacity-based license upgrade fees of the Company's mainframe products and, to a lesser extent, product license fees generated from the Company's distributed systems products. International license revenues represented 39% of total license revenues for the quarters ended December 31, 1997 and 1998, respectively, and 34% and 35% of total license revenues in the nine-month periods ending on such dates. International license revenue growth of 36% from the third quarter of fiscal 1998 to the comparable quarter of fiscal 1999 was derived principally from product license fees generated from the Company's distributed systems products and, to a lesser extent, from capacity-based license upgrade fees of the Company's mainframe products. For the nine months ended December 31, 1998, the 40% increase in international license revenues over the prior year is primarily attributable to capacity based license upgrade fees of the Company's mainframe products and, to a lesser extent, product license fees generated from the Company's distributed systems products. 11 12 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) The sustainability and growth of the Company's mainframe-based license revenues are dependent upon these capacity-based upgrade fees, particularly within its largest customer accounts. Most of the Company's largest customers have entered into enterprise license agreements allowing them to install the Company's products on an unspecified number of CPUs, subject to a maximum limit on the aggregate power of the CPUs as measured in MIPS. As companies increase their MIPS within their mainframe environment they may elect to increase or decrease the number of underlying CPU's. Regardless of which approach is utilized, additional fees are due if the MIPS limit is exceeded. Substantially all of these transactions include upgrade charges associated with additional processing capacity beyond the customer's current usage level and some include license fees for additional products. The fees associated with future additional mainframe processing capacity typically comprise from one-half to substantially all of the license fees included in the enterprise license transaction. The Company has experienced a strong increase in demand from its largest customers for the right to run its products on increased current and anticipated mainframe processing capacity as enterprises invest heavily in their core OS/390 mainframe information systems. This trend has led to larger single transactions with higher per MIPS discounts. The Company expects that it will continue to be dependent upon these capacity-related license revenue components. With the rapid advancement of distributed systems technology and customers' needs for more functional and open applications, such as pre-packaged ERP applications, to replace legacy systems, there can be no assurance that the demand for mainframe processing capacity or the higher operating efficiencies afforded by the Company's products will continue at current levels. Should this trend slow dramatically or reverse, it would adversely impact the Company's mainframe license revenues and its operating results. See the discussion below under the heading "Certain Risks and Uncertainties that Could Affect Future Operating Results." Maintenance and Support Revenues Maintenance and support revenues represent the ratable recognition of fees to enroll licensed products in the Company's software maintenance, enhancement and support program, and recognition of revenues associated with the Company's services business. Maintenance and support enrollment entitles customers to product enhancements, technical support services and ongoing compatibility with third-party operating systems, database management systems and applications. These fees are generally charged annually and equal 15% to 20% of the list price of the product at the time of renewal, less any applicable discounts. Maintenance revenues also include the ratable recognition of the bundled fees for any first-year maintenance services covered by the related perpetual license agreement. The Company continues to invest heavily in product maintenance and support and believes that maintaining its reputation for superior product support is a key component of its value pricing model. Maintenance revenues have increased over the last three fiscal years as a result of the continuing growth in the base of installed products and the processing capacity on which they run. Maintenance fees increase as the processing capacity on which the products are installed increases; consequently, the Company receives higher absolute maintenance fees as customers install its products on additional processing capacity. Due to increased discounting at higher levels of additional processing capacity, 12 13 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) the maintenance fees on a per MIPS basis are typically reduced in enterprise license agreements. Historically, the Company has enjoyed high maintenance renewal rates for its mainframe-based products. Should customers migrate from their mainframe applications or find alternatives to the Company's products, increased cancellations could adversely impact the sustainability and growth of the Company's maintenance revenues. To date, the Company has been successful in extending its traditional maintenance and support pricing model to the distributed systems market. At this time, there is insufficient historical data to determine whether customers will continue to accept this pricing model and renew their maintenance and support contracts at the levels experienced in the mainframe market.
OPERATING EXPENSES Three Months Ended Nine Months Ended December 31, December 31, ------------ ------------ (in thousands) (in thousands) 1997 1998 Change 1997 1998 Change ---- ---- ------ ---- ---- ------ Selling and marketing $ 57,448 $ 78,457 37% $157,633 $213,005 35% Research and development 28,558 33,786 18% 75,084 101,440 35% Cost of maintenance services and product licenses 21,792 27,832 28% 64,658 76,624 19% General and administrative 16,596 21,688 31% 42,373 53,278 26% Acquired research and development -- -- -- 65,473 17,304 (74)% -------- -------- -------- -------- Total operating expenses $124,394 $161,763 30% $405,221 $461,651 14% ======== ======== ======== ========
Selling and Marketing The Company's selling and marketing expenses include personnel and related costs, sales commissions and costs associated with advertising, industry trade shows and sales seminars. Personnel costs were the largest single contributor to the expense growth in the three months and nine months ended December 31, 1998. This increase was primarily attributable to significant hiring of additional distributed systems sales representatives and technical sales support consultants. Sales commissions increased in the third quarter and first nine months of fiscal 1999 as a result of the 35% and 39% increases, respectively, in license revenues. Improved sales representative productivity, coupled with normal commission plan modifications, held sales commission expense growth below license revenue growth. Marketing costs have continued to increase to meet the requirements of marketing a greater number of increasingly complex distributed systems products and of supporting a growing indirect distribution channel. Other contributors to the increase were significantly higher levels of travel and entertainment expenses. 13 14 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) Research and Development Research and development expenses mainly comprise personnel costs related to software developers and development support personnel, including 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/software costs and telecommunications expenses necessary to maintain the Company's data processing center. Increases in the Company's research and development expenses in the third quarter of fiscal 1999 were the result of increased compensation costs associated with both software developers and development support personnel, as well as associated benefits and facilities costs. Research and development costs were reduced by amounts capitalized in accordance with Statement of Financial Accounting Standards (SFAS) No. 86. The Company capitalizes its software development costs when the projects under development reach technological feasibility as defined by SFAS No. 86. During the third quarter of fiscal 1998 and 1999, the Company capitalized approximately $9,263,000 and $17,935,000, respectively, of software development costs. Capitalized software development costs for the nine months ended December 31, 1997 and 1998 were $28,522,000 and $46,350,000, respectively. The growth in capitalized costs is primarily due to increases in new distributed systems product development, the porting of distributed systems products to alternate environments and increased integration development activity. Cost of Maintenance Services and Product Licenses Cost of maintenance services and product licenses consists of amortization of purchased and internally developed software, costs associated with the maintenance, enhancement and support of the Company's products and royalty fees. Growth in the cost of maintenance services and product licenses during the first nine months of fiscal 1999 was due to increases in customer support employees and capitalized software amortization. The Company amortized $4,217,000 and $9,626,000 in the third quarter of fiscal 1998 and 1999, respectively, of capitalized software development costs pursuant to SFAS No. 86. In these periods, the Company expensed $1,925,000 and $6,258,000, respectively, of capitalized software development costs to accelerate the amortization of certain software products. For the nine months ended December 31, 1997 and 1998, the Company amortized $13,511,000 and $23,139,000, respectively; including accelerated amortization of $7,564,000 and $10,508,000, respectively. The Company accelerated the amortization of these software products as they were not expected to generate sufficient future revenues which would be required for the Company to realize the carrying value of the assets. The Company expects its cost of maintenance services and product licenses will continue to increase as the Company capitalizes a higher level of software development costs and as the Company builds its distributed systems product support organization, which is less cost-effective than its mainframe support organization because of the complexity and variability of the environments in which the products operate. The distributed systems products operate in a high number of operating environments, including operating systems, DBMSs and ERP applications and require greater ongoing platform support development activity relative to the Company's OS/390 mainframe products. 14 15 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) General and Administrative General and administrative expenses are comprised primarily of compensation and personnel costs within executive management, finance and accounting, product distribution, facilities management and human resources. Other expenses included in general and administrative expenses are fees paid for legal and accounting services, consulting projects, insurance and costs of managing the Company's foreign currency exposure. Growth in general and administrative expenses for both the three months and nine months ended December 31, 1998 over the same periods ended December 31, 1997 was largely due to increased personnel costs and higher costs associated with the related infrastructure to support the Company's growth. Acquired Research and Development and Related Costs The Company did not incur acquired in-process research and development (IPR&D) costs during the quarters ended December 31, 1997 and 1998. Acquired IPR&D costs for the nine months ended December 31, 1997 and 1998 were $65,473,000 and $17,304,000, respectively. These technology charges related to the acquisition of DataTools and acquisitions of in-process technologies. The following table presents information, in thousands, concerning the purchase price allocations for the acquisitions accounted for under the purchase method for the nine months ended December 31, 1997 and 1998.
Goodwill Total Company Name Software Acquired IPR&D and Other Price ------------ -------- -------------- --------- ----- Fiscal 1998: DataTools $15,000 $54,372 $ 3,628 $73,000 Sento 1,800 5,900 -- 7,700 Software Partners 1,700 5,201 -- 6,901 ------- ------- ------- ------- $18,500 $65,473 $ 3,628 $87,601 ======= ======= ======= ======= Fiscal 1999: Nastel $ -- $ 6,000 $ -- $ 6,000 Envive 6,400 11,304 -- 17,704 ------- ------- ------- ------- $ 6,400 $17,304 $ -- $23,704 ======= ======= ======= =======
The Company acquired DataTools in May 1997, for an aggregate purchase price of $73 million. DataTools owns certain Relational Database Management Systems (RDBMS) specific back-up products that were sold as stand-alone products. Its' flagship product is called SQL Backtrack (SQL-BT). DataTools was in the process of developing numerous products and enhanced versions of products, including next generation versions of SQL-BT for the Informix platform (SBI) and the Oracle platform (SBO), as well as first generation products for the Microsoft SQL (SBM) and Sybase IDR (SBS/I) platforms. The Company allocated approximately $18.6 million of the 15 16 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) purchase price to developed technology, workforce and goodwill. The Company allocated approximately $54.4 million to acquired IPR&D. The most significant four specific development projects, which comprised $40.6 million (74%) of the acquired IPR&D, pertained to the above mentioned projects. The primary remaining efforts associated with the IPR&D included code completion in several key areas, such as logical extraction and piecemeal back-up and recovery, large database support and performance-related functionality. As of the acquisition date, the expected costs to complete the IPR&D were, on a calendar year basis, approximately $2.9 million in 1997, $4.7 million in 1998, $2.1 million in 1999, and $729,000 in 2000. The Company has made significant progress towards the completion of most of the underlying IPR&D projects. With respect to the estimated completion costs, the Company is below these forecasted amounts as a result of decisions to terminate certain of the IPR&D projects (such as the SBS/I project noted below) and more efficient development efforts than anticipated. The following summarizes the four primary projects pertaining to the DataTools IPR&D. The Company spent approximately $700,000 through March 31, 1998 on the SBM product in addition to the approximate $750,000 spent by DataTools prior to the acquisition. The Company released this product in April 1998. The SBO product was released in June 1998 for both the NT and Unix environments. The IPR&D was successfully completed resulting in new functionality in several areas, including back-up and recovery scheduling, remote BU&R, archive log management and a graphical user interface. The Company spent approximately $1.7 million in completing these technologies subsequent to the DataTools acquisition. BMC abandoned the SBS/I project, on which DataTools had spent approximately $1 million in research and development. BMC made this decision based on concerns over market demand and the allocation of Sybase resources to the core Sybase product. The Company spent less than $500,000 on this technology prior to deciding to cancel this development project. The Company spent approximately $1 million on SBI through March 31, 1998, in addition to the approximate $500,000 spent by DataTools prior to the transaction. As a result, Version 2.0 of this product was released in April 1998. In June 1997, the Company acquired technology from Sento Technical Innovations, Inc. The Company has since abandoned the technology and expensed the entire purchase price. In July 1997, the Company acquired certain software code from Software Partners/32, Inc. (Software Partners) for a total purchase price of $6.9 million. The Company allocated $1.7 million of the purchase price to completed technology and $5.2 million to acquired IPR&D. This code permits file system back-up and recovery, but was not competitive with the leading products in this market. While 16 17 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) the acquired code contained certain key functionality, it was incomplete in various aspects. As a result, the Company attempted to complete this code by, among other things, developing support for dual network hosts, enhancing the interface with the SQL-BT object back-up stream interface (OBSI), developing support for SBI and SBM and developing support for code and integrating it into its Patrol recovery manager product. These efforts were unsuccessful, and the Company is now attempting to complete the code and integrate it into a planned distributed systems application recovery management product scheduled to be released in the latter part of fiscal 2000. The expected costs to complete the IPR&D (and to integrate the technology into the application recovery product) are approximately $720,000 in fiscal 1999 and $1,200,000 in fiscal 2000. The allocation of purchase price to completed technology reflects the estimated discounted future cash flows associated with the customers using the existing technology. In the latter part of fiscal 1998, the Company was in the process of designing a middleware management product to assist customers with optimizing middleware performance and with handling enterprise environmental changes. In this regard, in April 1998, the Company acquired a license from Nastel Technologies, Inc. (Nastel) for certain infrastructure source code for use in its MQ management product that was under development, but had not yet reached technological feasibility. Accordingly, the Company allocated the entire $6 million purchase price to IPR&D. BMC completed the acquired IPR&D by creating an effective installation routine, developing an automated MQ configuration routine, fortifying the underlying Nastel database and modifying the code to work in environments with complementary management products. Upon completion of the IPR&D, the Company completed the initial related product after developing efficient data collection, user interface and business logic code. The Company expects to incur approximately $1.6 million in development costs prior to the planned release of its middleware management product in the third quarter of fiscal 1999. In June 1998, BMC entered into a technology agreement with Envive Corporation (Envive) primarily to strengthen BMC's ERP business management solutions to provide better diagnostic and correlation ability, service level management and end-to-end monitoring capability. The Company also secured the rights to distribute certain products in the SAP management market. The Company's committed costs associated with the transaction approximated $17.7 million. The Company allocated 17 18 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) $6.4 million of the transaction to software assets, prepaid royalties and interest. The remaining $11.3 million was allocated to acquired IPR&D which had not reached technological feasibility as of the date of the transaction. The Company believes the acquired IPR&D is approximately 45% complete towards development of end-to-end and service level management functionality across the major ERP platforms, but there is no assurance that it will be successful in developing such marketable technology. The Company expects costs to complete the IPR&D will approximate $250,000 in fiscal 1999, $1,900,000 in fiscal 2000 and $400,000 in fiscal 2001. The values assigned to acquired IPR&D in the above mentioned transactions were generally determined by estimating the costs to develop the purchased in-process technology into commercially viable products, estimating the resulting net cash flows from the projects and discounting the net cash flows to their present value. The revenue projections used to value the acquired in-process research and development were based on estimates of relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by the Company and its competitors. Operating expenses were estimated based on historical results and anticipated profit margins. Due to purchasing power increases and general economies of scale, estimated operating expenses as a percentage of revenues were, in some cases, estimated to decrease after the acquisitions. The rates utilized to discount the net cash flows to their present value were based on cost of capital calculations. Due to the nature of the forecast and risks associated with the projected growth, profitability and the developmental nature of the projects, discount rates of 16% to 20% were used to value the acquired IPR&D. These discount rates were commensurate with the respective stage of development and the uncertainties in the economic estimates described above. If the acquired IPR&D projects are not successfully completed, the Company's business, operating results, and financial condition may be materially adversely affected in future periods. In addition, the value of other intangible assets acquired may become impaired. OTHER INCOME For the third quarter of fiscal 1999, other income was $13,102,000, reflecting an increase of 64% over 7,978,000 of other income in the same quarter of fiscal 1998. Other income consists primarily of interest earned on tax-exempt municipal securities, euro bonds, corporate bonds, mortgage securities and money market funds. The increase in other income is primarily due to an increase of approximately 81% in cash and investment securities from December 31, 1997 to December 31, 1998. INCOME TAXES For the third quarter of fiscal 1999, income tax expense was $35,034,000 compared to $28,009,000 for the same quarter in fiscal 1998. The Company's income tax expense represents the federal statutory rate of 35%, plus certain foreign and state taxes, reduced primarily by the benefit from lower income taxes associated with the Company's European operations and the effect of tax exempt interest earned from cash investments. 18 19 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) LIQUIDITY AND CAPITAL RESOURCES The Company has financed its growth through funds generated from operations. As of December 31, 1998, the Company had cash, cash equivalents and investment securities of $1,024,975,000. The Company did not repurchase any shares on the open market during the first nine months of fiscal 1999 as its stock repurchase program was rescinded by the Board of Directors in connection with the pooling of interests transaction with BGS Systems, Inc. As a result of the proposed Boole transaction noted above, the Company does not expect to reinstate its share repurchase program. The Company believes that existing cash balances and funds generated from operations will be sufficient to meet its liquidity requirements for the foreseeable future. B. CERTAIN RISKS AND UNCERTAINTIES THAT COULD AFFECT FUTURE OPERATING RESULTS. BMC's Stock Price is Volatile. BMC's stock price has been and is highly volatile. BMC's stock price is based almost completely on current expectations of sustained future revenue and earnings growth rates. Any failure to meet anticipated revenue and earnings levels in a period or any negative change in perceived long-term growth prospects of the combined company would likely have a significant adverse effect on the combined company's stock price. The growth rates of BMC's license revenues, total revenues, net earnings and earnings per share, excluding one-time charges, have accelerated over the last seven quarters. BMC may not achieve, in future periods, these relatively higher rates of growth. BMC's Earnings Associated with License Revenues May Fluctuate. The timing and amount of BMC's license revenues are subject to a number of factors that make estimation of operating results prior to the end of a quarter extremely uncertain. BMC generally operates with little or no sales backlog and, as a result, license revenues in any quarter are dependent upon contracts entered into or orders booked and shipped in that quarter. Most of BMC's sales are closed at the end of each quarter, and there has been and continues to be a trend toward larger enterprise license transactions, which can have sales cycles of up to a year or more and require approval by a customer's upper management. These transactions are typically difficult to manage and predict. Failure to close an expected individually significant transaction could cause BMC's revenues and earnings in a period to fall short of expectations. BMC generally does not know whether revenues and earnings will meet expected results until the final days or day of a quarter. BMC May Receive Less Revenues From Enterprise Licenses. Fees from enterprise license transactions remain a fundamental component of BMC's revenues. There is a risk that BMC's revenues could be adversely affected because of a reduction in fees from enterprise licenses. Enterprise license fees continue to represent an increasingly greater percentage of BMC's total mainframe license revenues. In fiscal 1998, enterprise license fees for future additional processing capacity and license restructurings comprised approximately one-fourth of BMC's total revenues. These revenues are dependent upon BMC's customers' continuing to perceive an increasing need to use BMC's existing software products on substantially greater mainframe processing capacity in future periods. If BMC's customers' processing capacity 19 20 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) growth were to slow and/or if such customers were to perceive alternatives to relying upon BMC's current mainframe products, BMC's revenues would be adversely impacted. Prices for BMC's Mainframe Products Could Decline. There is a risk that pricing pressures within the mainframe systems software markets could have an adverse effect on BMC's revenues and earnings. BMC's capacity-based upgrade fees associated with both current and future processing capacity contributed approximately one-third of total revenues in fiscal 1998. The charging of upgrade fees based on running previously licensed software on more powerful computers is standard among mainframe systems software vendors, including IBM. The pricing of these processing capacity-based fees is under constant pressure from customers, and IBM is aggressively seeking to reduce the costs of its mainframe systems software. BMC's High Operating Margins Could Decline. There is a risk that BMC will not be able to sustain its high operating margins which would adversely affect its earnings. BMC's operating margins, excluding one-time charges, have ranged between 39% and 40% in recent years, which is at the high-end of the range for peer companies. Since BMC's mix of business continues to shift to distributed systems revenues and since research and development, sales, support and distribution costs for distributed systems software products are generally higher than for mainframe products, operating margins will experience more pressure. IBM Could Affect BMC's Business. If IBM is successful in achieving performance and functional equivalence with BMC's products at a lower cost, BMC's business will be materially adversely affected. BMC derived approximately three-fourths of its total revenues in fiscal 1998 from software products for IBM and IBM-compatible mainframe computers. IBM continues to focus on reducing the overall software costs associated with the OS/390 mainframe platform. IBM continues, directly and through third parties, to aggressively enhance its utilities for IMS and DB2 to provide lower cost alternatives to the products provided by BMC and other independent software vendors. IBM has significantly increased its level of activity in the IMS and DB2 high speed utility markets over the last twelve months. Rapid Technological Change Could Adversely Affect BMC's Business. BMC's inability to keep pace with technological change in its industry would have an adverse effect on its revenues and earnings. BMC operates in a highly competitive industry characterized by rapid technological change. The distributed systems and application management markets in which BMC operates are far more crowded and competitive than its traditional mainframe systems management markets. BMC's ability to compete effectively and its growth prospects depend upon many factors, including: - the success of its existing client/server systems products; - the timely introduction and success of future software products; and - the ability of BMC's products to interoperate and perform well with existing and future leading databases and other platforms supported by its products. BMC has experienced long development cycles and product delays in the past, particularly with some of its client/server systems products, and expects to have delays in the future. Delays in new mainframe or client/server systems product introductions or less-than-anticipated market acceptance of these new products are possible and would have an adverse effect on BMC's revenues and earnings. New products or new versions of existing products 20 21 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) may, despite testing, contain undetected errors or bugs that will delay the introduction or adversely affect commercial acceptance of such products. BMC Could Have Difficulty Developing Products for Microsoft Platforms. Microsoft could significantly lower software price points in some of BMC's markets, which could place additional pricing pressure on BMC. BMC has invested and intends to continue to invest in the development of systems management products for Windows NT and BackOffice environments, but there are numerous uncertainties associated with BMC's ability to successfully execute this strategy. Microsoft Corporation has significantly increased its focus on developing operating systems, systems management products and databases that will provide business-critical class functionality. Specifically, Microsoft is aggressively promoting its BackOffice family of software products, including its Windows NT operating system and its SQL Server relational database management system, as lower cost alternatives to the UNIX operating systems, coupled with relational database management systems from Oracle Corporation, Sybase, Inc., Informix Corporation and other vendors. There Are Risks Associated with BMC's International Operations. BMC's operations and financial results could be significantly adversely affected by changes in foreign currency exchange rates, sluggish regional economic conditions, particularly in Europe and the Pacific Rim, and difficulties in staffing and managing international operations. BMC's future operating results depend on sustained performance improvement by its international offices. In this regard, the economies in Europe and the Pacific Rim regions have been depressed in the past year. There Are Risks Related to Year 2000 Compliance. The impact of Year 2000 issues on future BMC revenue is difficult to assess, but is a risk to be considered in evaluating BMC's future growth. BMC believes the current versions of its products are Year 2000 compliant. BMC does not intend to make all prior versions of its products Year 2000 compliant and has notified its customers as to which versions will and will not be Year 2000 compliant. BMC has developed transition plans for customers who expect to be using noncompliant versions of BMC's products on or after January 1, 2000 and does not expect to incur significant costs in accommodating them. BMC is unaware of any potential material liabilities or operational difficulties associated with Year 2000 compliance of its own internal information systems, which are based on Oracle Corporation's enterprise resource planning system. Efforts by customers to address Year 2000 issues may absorb a substantial part of their information technology budgets in the near term. There is much speculation that the cost of Year 2000 compliance efforts will significantly reduce spending on non-Year 2000 products through January 1, 2000. BMC believes that its core customers are well into their Year 2000 compliance programs and that this trend has not materially adversely affected demand for its products to date. Pending Acquisition. On November 2, 1998, the Company announced its agreement to acquire Boole through an exchange of common stock and stock options using an exchange rate of .675 shares of the Company's common stock for each share of Boole common stock. The acquisition is subject to approval by the Boole stockholders and to review by the SEC. The Company faces significant technical and organizational challenges in integrating Boole operations with those of the Company. The Company has plans to implement retention programs to keep many of the key technical, sales and marketing employees. Integration of the Boole products and organizational structure will be difficult, and there can be no assurance that the integration efforts will be successful. Boole is a party to the litigation described in Item 1. Legal Proceedings. If the merger is completed, the combined company will be responsible for any liabilities with respect to such litigation. For discussion of additional risks related to the proposed merger, see the Company's Registration Statement on Form S-4 filed with the SEC on February 3, 1999. FORWARD-LOOKING INFORMATION Certain of the information relating to BMC contained or incorporated by reference in this Form 10-Q is forward-looking in nature. All statements included or incorporated by reference in this Form 10-Q or made by management of BMC other than statements of historical fact regarding 21 22 BMC SOFTWARE, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (continued) BMC are forward-looking statements. Examples of forward-looking statements include statements regarding BMC's future financial results, operating results, market positions, product successes, business strategies, projected costs, future products, competitive positions and plans and objectives of management for future operations. In some cases, you can identify forward-looking statements by terminology, such as "may," "will," "should," "would," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of such terms or other comparable terminology. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in this Risk Factors section. These and many other factors could affect the future financial and operating results of BMC. These factors could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by or on behalf of BMC. 22 23 BMC SOFTWARE, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings. On November 13, 1998, Platinum Technology, Inc. ("Platinum") filed a complaint against the Company and Boole & Babbage, Inc. ("Boole") and a motion for preliminary injunction in the Circuit Court of the Eighteenth Circuit Chancery Division, DuPage County, Wheaton, Illinois. The complaint alleged that Boole was in breach of a standstill and exclusive negotiation agreement with Platinum, and that the Company tortiously interfered with that alleged agreement when it negotiated and executed the merger agreement with Boole. Based upon its complaint, Platinum sought to enjoin the merger between the Company and Boole and require Boole to negotiate exclusively with Platinum for a full and uninterrupted 120-day period. In early January 1999, Platinum withdrew its motion for preliminary injunction by which it sought to enjoin the merger and to require Boole to negotiate exclusively with Platinum for a full and uninterrupted 120-day period, and filed under seal a motion for permission to amend its complaint. On January 5, 1999, Platinum announced that by its proposed amended complaint, it would seek damages of at least $30 million as its remedy against Boole and it would dismiss the Company as a defendant in its lawsuit. On January 22, 1999, the court granted Platinum permission to amend its complaint to seek damages against Boole and to dismiss the Company from the litigation. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. None (b) Reports on Form 8-K. January 8, 1999 - Change in status regarding further developments in the ongoing litigation among Platinum, Boole and BMC. 23 24 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. Date: February 22, 1999 By: /S/ Max P. Watson Jr. ---------------------- ---------------------------------------- Max P. Watson Jr. Chairman of the Board, President and Chief Executive Officer Date: February 22, 1999 By: /S/ William M. Austin ----------------------- ---------------------------------------- William M. Austin Senior Vice President and Chief Financial Officer Date: February 22, 1999 By: /S/ Kevin M. Klausmeyer ---------------------- ---------------------------------------- Kevin M. Klausmeyer Chief Accounting Officer 24 25 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------ ----------- 27 Financial Data Schedule EX-27 2 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING DECEMBER 31, 1998. 1,000 9-MOS MAR-31-1999 APR-01-1998 DEC-31-1998 123,070 901,905 228,202 11,402 0 464,974 318,355 93,959 1,694,866 431,132 0 0 0 2,173 1,053,107 1,694,866 532,241 744,910 76,624 461,651 0 0 0 318,991 85,918 233,073 0 0 0 233,073 1.08 1.02
-----END PRIVACY-ENHANCED MESSAGE-----