x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan
|
|
38-2007430
|
(State or other jurisdiction of incorporation or organization)
|
|
(IRS Employer Identification No.)
|
PART I.
|
FINANCIAL INFORMATION |
Page
|
|
|
|
Item 1.
|
Financial Statements (unaudited) |
|
|
|
|
3
|
||
|
|
|
4
|
||
|
|
|
5
|
||
|
|
|
6 | ||
|
|
|
24 | ||
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
25
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk |
50
|
|
|
|
Item 4.
|
Controls and Procedures |
50
|
|
|
|
PART II.
|
OTHER INFORMATION |
|
|
|
|
Item 1A.
|
Risk Factors |
50
|
|
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds |
51
|
|
|
|
Item 6.
|
Exhibits |
52
|
|
|
|
53
|
ASSETS
|
June 30,
2013 |
March 31,
2013 |
||||||
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
81,329
|
$
|
89,873
|
||||
Accounts receivable, net
|
354,404
|
424,587
|
||||||
Deferred tax asset, net
|
43,062
|
37,618
|
||||||
Income taxes refundable
|
4,674
|
4,951
|
||||||
Prepaid expenses and other current assets
|
35,733
|
36,210
|
||||||
Total current assets
|
519,202
|
593,239
|
||||||
|
||||||||
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION
|
297,405
|
302,492
|
||||||
|
||||||||
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET
|
113,748
|
116,663
|
||||||
|
||||||||
ACCOUNTS RECEIVABLE
|
181,343
|
174,891
|
||||||
|
||||||||
DEFERRED TAX ASSET, NET
|
30,587
|
31,754
|
||||||
|
||||||||
GOODWILL
|
724,800
|
722,042
|
||||||
|
||||||||
OTHER ASSETS
|
30,451
|
32,201
|
||||||
|
||||||||
TOTAL ASSETS
|
$
|
1,897,536
|
$
|
1,973,282
|
||||
|
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
12,900
|
$
|
18,717
|
||||
Accrued expenses
|
92,002
|
103,994
|
||||||
Income taxes payable
|
24,729
|
14,507
|
||||||
Deferred revenue
|
386,105
|
417,862
|
||||||
Total current liabilities
|
515,736
|
555,080
|
||||||
|
||||||||
LONG TERM DEBT
|
15,000
|
18,000
|
||||||
|
||||||||
DEFERRED REVENUE
|
294,988
|
310,453
|
||||||
|
||||||||
ACCRUED EXPENSES
|
17,985
|
27,873
|
||||||
|
||||||||
DEFERRED TAX LIABILITY, NET
|
54,588
|
63,650
|
||||||
Total liabilities
|
898,297
|
975,056
|
||||||
|
||||||||
SHAREHOLDERS' EQUITY:
|
||||||||
Common stock
|
2,141
|
2,132
|
||||||
Additional paid-in capital
|
731,622
|
713,580
|
||||||
Retained earnings
|
280,780
|
301,298
|
||||||
Accumulated other comprehensive loss
|
(15,304
|
)
|
(18,784
|
)
|
||||
Total shareholders' equity
|
999,239
|
998,226
|
||||||
|
||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
1,897,536
|
$
|
1,973,282
|
|
Three Months Ended
June 30, |
|||||||
|
2013
|
2012
|
||||||
REVENUES:
|
||||||||
Software license fees
|
$
|
35,406
|
$
|
33,994
|
||||
Maintenance fees
|
98,528
|
102,949
|
||||||
Subscription fees
|
20,785
|
20,479
|
||||||
Professional services fees
|
48,696
|
48,152
|
||||||
Application services fees
|
24,101
|
20,587
|
||||||
|
||||||||
Total revenues
|
227,516
|
226,161
|
||||||
|
||||||||
OPERATING EXPENSES:
|
||||||||
Cost of software license fees
|
5,406
|
4,825
|
||||||
Cost of maintenance fees
|
8,221
|
8,946
|
||||||
Cost of subscription fees
|
8,147
|
7,393
|
||||||
Cost of professional services
|
40,349
|
42,301
|
||||||
Cost of application services
|
24,261
|
17,721
|
||||||
Technology development and support
|
26,535
|
26,497
|
||||||
Sales and marketing
|
59,493
|
62,190
|
||||||
Administrative and general
|
38,228
|
39,725
|
||||||
Restructuring costs
|
5,112
|
|||||||
|
||||||||
Total operating expenses
|
215,752
|
209,598
|
||||||
|
||||||||
INCOME FROM OPERATIONS
|
11,764
|
16,563
|
||||||
|
||||||||
OTHER INCOME (EXPENSE), NET
|
202
|
52
|
||||||
|
||||||||
INCOME BEFORE INCOME TAX PROVISION
|
11,966
|
16,615
|
||||||
|
||||||||
INCOME TAX PROVISION
|
1,999
|
6,147
|
||||||
|
||||||||
NET INCOME
|
$
|
9,967
|
$
|
10,468
|
||||
|
||||||||
Basic earnings per share
|
$
|
0.05
|
$
|
0.05
|
||||
|
||||||||
Diluted earnings per share
|
$
|
0.05
|
$
|
0.05
|
||||
|
||||||||
Dividends declared per common share
|
$
|
0.125
|
$
|
-
|
||||
|
||||||||
OTHER COMPREHENSIVE INCOME (LOSS), BEFORE TAX
|
||||||||
Foreign currency translation adjustments
|
$
|
3,223
|
$
|
(12,115
|
)
|
|||
|
||||||||
TAX ATTRIBUTES OF ITEMS IN OTHER COMPREHENSIVE INCOME (LOSS)
|
||||||||
Foreign currency translation adjustments
|
(257
|
)
|
(3,287
|
)
|
||||
|
||||||||
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
|
3,480
|
(8,828
|
)
|
|||||
|
||||||||
COMPREHENSIVE INCOME
|
$
|
13,447
|
$
|
1,640
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
9,967
|
10,468
|
|||||
Adjustments to reconcile net income to net cash provided by operations:
|
||||||||
Depreciation and amortization
|
16,452
|
15,369
|
||||||
Stock award compensation
|
10,437
|
8,289
|
||||||
Deferred income taxes
|
(14,148
|
)
|
(884
|
)
|
||||
Other
|
13
|
9
|
||||||
Net change in assets and liabilities, net of effects from currency fluctuations:
|
||||||||
Accounts receivable
|
60,935
|
84,862
|
||||||
Prepaid expenses and other assets
|
1,871
|
(685
|
)
|
|||||
Accounts payable and accrued expenses
|
(25,892
|
)
|
(36,468
|
)
|
||||
Deferred revenue
|
(41,987
|
)
|
(68,088
|
)
|
||||
Income taxes
|
11,002
|
5,253
|
||||||
Net cash provided by operating activities
|
28,650
|
18,125
|
||||||
|
||||||||
CASH FLOWS USED IN INVESTING ACTIVITIES:
|
||||||||
Purchase of:
|
||||||||
Property and equipment
|
(1,667
|
)
|
(2,244
|
)
|
||||
Capitalized software
|
(5,745
|
)
|
(8,846
|
)
|
||||
Other
|
(275
|
)
|
(600
|
)
|
||||
Net cash used in investing activities
|
(7,687
|
)
|
(11,690
|
)
|
||||
|
||||||||
CASH FLOWS USED IN FINANCING ACTIVITIES:
|
||||||||
Proceeds from borrowings
|
26,500
|
41,000
|
||||||
Payments on borrowings
|
(29,500
|
)
|
(49,500
|
)
|
||||
Net proceeds from exercise of stock awards including excess tax benefits
|
7,105
|
2,517
|
||||||
Employee contribution to stock purchase plans
|
651
|
818
|
||||||
Repurchase of common stock
|
(4,962
|
)
|
(14,075
|
)
|
||||
Dividends
|
(26,741
|
)
|
||||||
Other
|
(299
|
)
|
||||||
Net cash used in financing activities
|
(27,246
|
)
|
(19,240
|
)
|
||||
|
||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
(2,261
|
)
|
(2,868
|
)
|
||||
|
||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(8,544
|
)
|
(15,673
|
)
|
||||
|
||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
89,873
|
99,180
|
||||||
|
||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
81,329
|
$
|
83,507
|
|
As of June 30, 2013
|
|||||||||||||||||||
|
Greater than
|
|||||||||||||||||||
|
0-29 days
|
30-90 days
|
90 days
|
Total
|
||||||||||||||||
|
past
|
past
|
past
|
financing
|
||||||||||||||||
|
invoice date
|
invoice date
|
invoice date
|
Unbilled
|
receivables
|
|||||||||||||||
Pass rating
|
||||||||||||||||||||
Software products
|
$
|
1,202
|
$
|
991
|
$
|
304
|
$
|
41,929
|
$
|
44,426
|
||||||||||
Loans
|
3,327
|
3,327
|
||||||||||||||||||
Total
|
1,202
|
991
|
304
|
45,256
|
47,753
|
|||||||||||||||
|
||||||||||||||||||||
Watch rating
|
||||||||||||||||||||
Software products
|
170
|
170
|
||||||||||||||||||
|
||||||||||||||||||||
Total financing receivables
|
$
|
1,202
|
$
|
991
|
$
|
474
|
$
|
45,256
|
$
|
47,923
|
|
As of March 31, 2013
|
|||||||||||||||||||
|
Greater than
|
|||||||||||||||||||
|
0-29 days
|
30-90 days
|
90 days
|
Total
|
||||||||||||||||
|
past
|
past
|
past
|
financing
|
||||||||||||||||
|
invoice date
|
invoice date
|
invoice date
|
Unbilled
|
receivables
|
|||||||||||||||
Pass rating
|
||||||||||||||||||||
Software products
|
$
|
3,311
|
$
|
679
|
$
|
1,324
|
$
|
42,659
|
$
|
47,973
|
||||||||||
Loans
|
3,771
|
3,771
|
||||||||||||||||||
Total
|
3,311
|
679
|
1,324
|
46,430
|
51,744
|
|||||||||||||||
|
||||||||||||||||||||
Watch rating
|
||||||||||||||||||||
Software products
|
179
|
179
|
||||||||||||||||||
|
||||||||||||||||||||
Total financing receivables
|
$
|
3,311
|
$
|
679
|
$
|
1,503
|
$
|
46,430
|
$
|
51,923
|
|
As of June 30, 2013
|
|||||||||||||||
|
Quoted Prices in
|
Significant
|
Significant
|
|||||||||||||
|
Active Markets for
|
Other Observable
|
Unobservable
|
|||||||||||||
|
Estimated
|
Identical Assets
|
Inputs
|
Inputs
|
||||||||||||
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Assets:
|
||||||||||||||||
|
||||||||||||||||
Cash equivalents - money market funds
|
$
|
2,804
|
$
|
2,804
|
-
|
-
|
||||||||||
|
||||||||||||||||
Liabilities:
|
||||||||||||||||
|
||||||||||||||||
Foreign exchange derivatives
|
$
|
124
|
-
|
$
|
124
|
-
|
||||||||||
|
||||||||||||||||
|
As of March 31, 2013
|
|||||||||||||||
|
Quoted Prices in
|
Significant
|
Significant
|
|||||||||||||
|
Active Markets for
|
Other Observable
|
Unobservable
|
|||||||||||||
|
Estimated
|
Identical Assets
|
Inputs
|
Inputs
|
||||||||||||
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Assets:
|
||||||||||||||||
|
||||||||||||||||
Cash equivalents - money market funds
|
$
|
11,525
|
$
|
11,525
|
-
|
-
|
||||||||||
|
||||||||||||||||
Foreign exchange derivatives
|
$
|
31
|
-
|
$
|
31
|
-
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
Basic earnings per share:
|
2013
|
2012
|
||||||
|
||||||||
Numerator:
|
||||||||
Net income
|
$
|
9,967
|
$
|
10,468
|
||||
|
||||||||
Denominator:
|
||||||||
Weighted-average common shares outstanding
|
213,640
|
217,510
|
||||||
|
||||||||
Basic earnings per share
|
$
|
0.05
|
$
|
0.05
|
||||
|
||||||||
Diluted earnings per share:
|
||||||||
|
||||||||
Numerator:
|
||||||||
Net income
|
$
|
9,967
|
$
|
10,468
|
||||
|
||||||||
Denominator:
|
||||||||
Weighted-average common shares outstanding
|
213,640
|
217,510
|
||||||
Dilutive effect of stock awards
|
6,054
|
3,886
|
||||||
|
||||||||
Total shares
|
219,694
|
221,396
|
||||||
|
||||||||
Diluted earnings per share
|
$
|
0.05
|
$
|
0.05
|
|
Three Months Ended
|
|||||||||||||||
|
June 30, 2013
|
|||||||||||||||
|
Number of
Options |
Weighted
Average |
Weighted
Average |
Aggregate
Intrinsic |
||||||||||||
Options outstanding as of March 31, 2013
|
19,076
|
$
|
8.44
|
|||||||||||||
Granted
|
117
|
10.73
|
||||||||||||||
Exercised
|
(885
|
)
|
7.46
|
$
|
3,363
|
|||||||||||
Forfeited
|
(74
|
)
|
11.33
|
|||||||||||||
Cancelled/expired
|
(68
|
)
|
10.04
|
|||||||||||||
Options outstanding as of June 30, 2013
|
18,166
|
$
|
8.48
|
6.38
|
$
|
36,724
|
||||||||||
|
||||||||||||||||
Options vested and expected to vest, net of estimated forfeitures, as of June 30, 2013
|
17,574
|
$
|
8.45
|
6.30
|
$
|
36,021
|
||||||||||
|
||||||||||||||||
Options exercisable as of June 30, 2013
|
11,903
|
$
|
8.22
|
5.36
|
$
|
26,944
|
|
Three Months Ended
|
|||||||||||||||
|
June 30, 2013
|
|||||||||||||||
|
Number of
Options |
Weighted
Average |
Weighted
Average |
Aggregate
Intrinsic |
||||||||||||
Options outstanding as of March 31, 2013
|
3,648
|
$
|
9.79
|
|||||||||||||
Granted
|
594
|
11.30
|
||||||||||||||
Forfeited/Cancelled
|
(926
|
)
|
9.92
|
|||||||||||||
Options outstanding as of June 30, 2013
|
3,316
|
$
|
10.02
|
9.33
|
$
|
1,800
|
||||||||||
|
||||||||||||||||
Options vested and expected to vest, net of estimated forfeitures, as of June 30, 2013
|
479
|
$
|
11.30
|
9.88
|
$
|
-
|
||||||||||
|
||||||||||||||||
Options exercisable as of June 30, 2013
|
-
|
$
|
-
|
-
|
$
|
-
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
|
||||||||
Expected volatility
|
39.24
|
%
|
41.27
|
%
|
||||
Risk-free interest rate
|
1.54
|
%
|
1.01
|
%
|
||||
Expected lives at date of grant (in years)
|
7.5
|
6.1
|
||||||
Weighted-average fair value of the options granted
|
$
|
2.82
|
$
|
3.58
|
||||
Dividend yield assumption (1)
|
4.41
|
%
|
0.00
|
%
|
(1)
|
In January 2013, our Board of Directors announced its intention to begin paying cash dividends totaling $0.50 per share annually, to be paid quarterly beginning in the first quarter of fiscal 2014. Prior to that, the Company had never paid a dividend or announced any intentions to pay a dividend.
|
|
Three Months Ended
|
|||||||||||
|
June 30, 2013
|
|||||||||||
|
Shares
|
Weighted
Average |
Aggregate
Intrinsic |
|||||||||
|
||||||||||||
Non-vested RSU outstanding as of March 31, 2013
|
4,850
|
|||||||||||
Granted
|
327
|
$
|
11.60
|
|||||||||
Dividend Equivalents Issued
|
45
|
10.93
|
||||||||||
Released
|
(354
|
)
|
$
|
4,039
|
||||||||
Forfeited
|
(45
|
)
|
||||||||||
Non-vested RSU outstanding as of June 30, 2013
|
4,823
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
Stock-based compensation classified as:
|
||||||||
|
||||||||
Cost of maintenance fees
|
$
|
178
|
$
|
217
|
||||
Cost of subscription fees
|
29
|
35
|
||||||
Cost of professional services
|
84
|
92
|
||||||
Cost of application services
|
486
|
322
|
||||||
Technology development and support
|
575
|
644
|
||||||
Sales and marketing
|
2,776
|
1,784
|
||||||
Administrative and general
|
4,518
|
5,195
|
||||||
Restructuring costs
|
1,791
|
|||||||
|
||||||||
Total stock-based compensation expense before income tax provision
|
$
|
10,437
|
$
|
8,289
|
|
APM
|
MF
|
CP
|
UF
|
PS
|
AS
|
Total
|
|||||||||||||||||||||
Goodwill as of March 31, 2013
|
$
|
469,947
|
$
|
140,557
|
$
|
22,079
|
$
|
21,280
|
$
|
42,794
|
$
|
25,385
|
$
|
722,042
|
||||||||||||||
|
||||||||||||||||||||||||||||
Effect of foreign currency translation
|
2,758
|
-
|
-
|
-
|
-
|
-
|
2,758
|
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
Goodwill as of June 30, 2013
|
$
|
472,705
|
$
|
140,557
|
$
|
22,079
|
$
|
21,280
|
$
|
42,794
|
$
|
25,385
|
$
|
724,800
|
|
As of June 30, 2013
|
|||||||||||
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||||
Unamortized intangible assets:
|
||||||||||||
Trademarks
|
$
|
4,402
|
$
|
4,402
|
||||||||
|
||||||||||||
Amortized intangible assets:
|
||||||||||||
Capitalized software
|
||||||||||||
Internally developed
|
249,617
|
$
|
(189,551
|
)
|
60,066
|
|||||||
Purchased
|
165,497
|
(144,953
|
)
|
20,544
|
||||||||
Customer relationship
|
52,049
|
(26,284
|
)
|
25,765
|
||||||||
Other
|
20,014
|
(17,043
|
)
|
2,971
|
||||||||
Total amortized intangible assets
|
$
|
487,177
|
$
|
(377,831
|
)
|
$
|
109,346
|
|||||
|
||||||||||||
|
As of March 31, 2013
|
|||||||||||
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|||||||||
Unamortized intangible assets:
|
||||||||||||
Trademarks
|
$
|
4,428
|
$
|
4,428
|
||||||||
|
||||||||||||
Amortized intangible assets:
|
||||||||||||
Capitalized software
|
||||||||||||
Internally developed
|
243,872
|
$
|
(184,732
|
)
|
59,140
|
|||||||
Purchased
|
165,117
|
(142,453
|
)
|
22,664
|
||||||||
Customer relationship
|
52,036
|
(25,281
|
)
|
26,755
|
||||||||
Other
|
19,884
|
(16,208
|
)
|
3,676
|
||||||||
Total amortized intangible assets
|
$
|
480,909
|
$
|
(368,674
|
)
|
$
|
112,235
|
|
Three Months Ended
|
|||||||
June 30, | ||||||||
|
2013
|
2012
|
||||||
Amortized intangible assets:
|
||||||||
Capitalized software
|
||||||||
Internally developed
|
$
|
4,819
|
$
|
3,470
|
||||
Purchased
|
2,370
|
2,407
|
||||||
Customer relationship
|
1,031
|
1,044
|
||||||
Other
|
762
|
919
|
||||||
|
||||||||
Total amortization expense
|
$
|
8,982
|
$
|
7,840
|
|
Fiscal Year Ended March 31,
|
|||||||||||||||||||||||
|
2014
|
2015
|
2016
|
2017
|
2018
|
Thereafter
|
||||||||||||||||||
Amortized intangible assets:
|
||||||||||||||||||||||||
Capitalized software
|
$
|
28,229
|
$
|
23,593
|
$
|
19,981
|
$
|
10,846
|
$
|
4,706
|
$
|
444
|
||||||||||||
Customer relationship
|
4,123
|
4,123
|
4,123
|
3,958
|
3,814
|
6,655
|
||||||||||||||||||
Other
|
2,995
|
738
|
-
|
-
|
-
|
-
|
||||||||||||||||||
|
||||||||||||||||||||||||
Total amortization expense
|
$
|
35,347
|
$
|
28,454
|
$
|
24,104
|
$
|
14,804
|
$
|
8,520
|
$
|
7,099
|
|
Three Months Ended
|
|||||||||||||||||||||||||||||||
|
June 30, 2013
|
|||||||||||||||||||||||||||||||
|
Unallocated
|
|||||||||||||||||||||||||||||||
|
Expenses
|
|||||||||||||||||||||||||||||||
|
APM
|
MF
|
CP
|
UF
|
PS
|
AS
|
& Eliminations (1)
|
Total
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Software license fees
|
$
|
22,011
|
$
|
9,732
|
$
|
2,196
|
$
|
1,467
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
35,406
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
Maintenance fees
|
23,704
|
63,458
|
4,127
|
7,239
|
-
|
-
|
-
|
98,528
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Subscription fees
|
20,132
|
-
|
653
|
-
|
-
|
-
|
-
|
20,785
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Professional services fees
|
7,602
|
69
|
3,569
|
1,124
|
36,986
|
-
|
(654
|
)
|
48,696
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Application services fees
|
-
|
-
|
-
|
-
|
-
|
24,101
|
-
|
24,101
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total revenues
|
73,449
|
73,259
|
10,545
|
9,830
|
36,986
|
24,101
|
(654
|
)
|
227,516
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Operating expenses
|
74,046
|
19,176
|
10,314
|
5,170
|
30,632
|
25,423
|
50,991
|
215,752
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Contribution / operating margin
|
$
|
(597
|
)
|
$
|
54,083
|
$
|
231
|
$
|
4,660
|
$
|
6,354
|
$
|
(1,322
|
)
|
$
|
(51,645
|
)
|
$
|
11,764
|
|||||||||||||
(1) |
Unallocated operating expenses include $5.1 million in restructuring expenses. See note 10 for additional information.
|
|
Three Months Ended
|
|||||||||||||||||||||||||||||||
|
June 30, 2012
|
|||||||||||||||||||||||||||||||
|
Unallocated
|
|||||||||||||||||||||||||||||||
|
APM
|
MF
|
CP
|
UF
|
PS
|
AS
|
Expenses
|
Total
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Software license fees
|
$
|
22,357
|
$
|
9,050
|
$
|
793
|
$
|
1,794
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
33,994
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
Maintenance fees
|
20,765
|
70,546
|
4,130
|
7,508
|
-
|
-
|
-
|
102,949
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Subscription fees
|
19,852
|
-
|
627
|
-
|
-
|
-
|
-
|
20,479
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Professional services fees
|
8,195
|
293
|
3,444
|
1,176
|
35,044
|
-
|
-
|
48,152
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Application services fees
|
-
|
-
|
-
|
-
|
-
|
20,587
|
-
|
20,587
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total revenues
|
71,169
|
79,889
|
8,994
|
10,478
|
35,044
|
20,587
|
-
|
226,161
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Operating expenses
|
76,096
|
22,845
|
9,689
|
5,419
|
28,920
|
18,016
|
48,613
|
209,598
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Contribution / operating margin
|
$
|
(4,927
|
)
|
$
|
57,044
|
$
|
(695
|
)
|
$
|
5,059
|
$
|
6,124
|
$
|
2,571
|
$
|
(48,613
|
)
|
$
|
16,563
|
|
Three Months Ended
|
|||||||
June 30,
|
||||||||
|
2013
|
2012
|
||||||
Revenues:
|
||||||||
United States
|
$
|
141,963
|
$
|
144,844
|
||||
Europe and Africa
|
51,725
|
49,374
|
||||||
Other international operations
|
33,828
|
31,943
|
||||||
Total revenues
|
$
|
227,516
|
$
|
226,161
|
|
As of
|
As of
|
||||||
|
June 30,
|
March 31,
|
||||||
|
2013
|
2013
|
||||||
Long-lived assets
|
||||||||
United States
|
$
|
881,760
|
$
|
888,032
|
||||
Austria
|
203,004
|
201,224
|
||||||
Other
|
18,051
|
17,082
|
||||||
Total long-lived assets
|
$
|
1,102,815
|
$
|
1,106,338
|
|
Employee Termination Benefits
|
Lease Abandonment Costs
|
Other
|
Total Restructuring Activity
|
||||||||||||
Accrual at March 31, 2013
|
$
|
4,670
|
$
|
2,717
|
$
|
80
|
$
|
7,467
|
||||||||
|
||||||||||||||||
Restructuring charge
|
5,110
|
-
|
2
|
5,112
|
||||||||||||
|
||||||||||||||||
Payments
|
(4,770
|
)
|
(405
|
)
|
(67
|
)
|
(5,242
|
)
|
||||||||
|
||||||||||||||||
Non-cash charges
|
(1,791
|
)
|
-
|
-
|
(1,791
|
)
|
||||||||||
|
||||||||||||||||
Accrual at June 30, 2013
|
$
|
3,219
|
$
|
2,312
|
$
|
15
|
$
|
5,546
|
|
Quarter Ended
|
|||||||||||||||||||||||||||||||
|
June 30, 2013
|
|||||||||||||||||||||||||||||||
|
Unallocated
|
|||||||||||||||||||||||||||||||
|
APM
|
MF
|
CP
|
UF
|
PS
|
AS
|
Expenses
|
Total
|
||||||||||||||||||||||||
Employee termination benefits
|
$
|
1,040
|
$
|
384
|
$
|
36
|
$
|
189
|
$
|
84
|
$
|
95
|
$
|
3,282
|
$
|
5,110
|
·
|
A substantial portion of our mainframe segment revenue is dependent on our customers’ continued use of International Business Machines Corporation and IBM-compatible products.
|
·
|
Our product revenue is dependent on the acceptance of our pricing structure for our software solutions.
|
·
|
Maintenance revenue could continue to decline.
|
·
|
Our primary source of profitability is from our mainframe segment. As revenues in this segment decline, our profitability will decline unless we are able to significantly increase margins in other operating segments.
|
·
|
If we are not able to grow our APM revenue, we may fail to achieve our forecasted financial results and we may fail to meet the expectations of analysts or investors which could cause our stock price to decline.
|
·
|
Changes in the financial services industry could have a negative impact on our revenue and margins.
|
·
|
We may fail to achieve our forecasted financial results due to inaccurate sales forecasts or other unpredictable factors. If we fail to meet the expectations of analysts or investors, our stock price could decline substantially.
|
·
|
Our business could be negatively affected as a result of actions of shareholders or others.
|
·
|
If we fail to achieve the results we expect from our expense reduction program, our results of operations and financial condition may be adversely affected.
|
·
|
The market for application services is highly competitive with emerging competitors. As the market matures, competition may increase and could have a material negative impact on our results of operations.
|
·
|
If we are not successful in maintaining our professional services strategy, our revenue and margins may further decline.
|
·
|
Economic uncertainties or slowdowns may reduce demand for our products and services, which may have a material adverse effect on our revenues and operating results.
|
·
|
Defects or disruptions in our hosted software or application services networks or interruptions or delays in service would impair the delivery of our on-demand service and could diminish demand for our services and subject us to substantial liability.
|
·
|
Future changes in the U.S. domestic automotive manufacturing business could reduce demand for our professional services and Covisint application services, which may have a material negative effect on our revenues and operating results.
|
·
|
If the fair value of our long-lived assets deteriorated below the carrying value of these assets, recognition of an impairment loss would be required, which could materially and adversely affect our financial results.
|
·
|
Our software technology may infringe the proprietary rights of others.
|
·
|
Our results could be adversely affected by increased competition, pricing pressures and technological changes within the software products market.
|
·
|
The market for professional services is highly competitive, fragmented and characterized by low barriers to entry.
|
·
|
We must develop or acquire product enhancements and new products to succeed.
|
·
|
Acquisitions may be difficult to integrate, disrupt our business or divert the attention of our management and may result in financial results that are different than expected.
|
·
|
We are exposed to exchange rate risks on foreign currencies and to other international risks that may adversely affect our business and results of operations.
|
·
|
Current laws may not adequately protect our proprietary rights.
|
·
|
The loss of certain key employees and technical personnel or our inability to hire additional qualified personnel could have a material adverse effect on our business.
|
·
|
Unanticipated changes in our effective tax rates, or exposure to additional income tax liabilities, could affect our profitability.
|
·
|
Our stock repurchase plan and future dividend payments may be suspended or terminated at any time, which may result in a decrease in our stock price.
|
·
|
Acts of terrorism, acts of war and other unforeseen events may cause damage or disruption to us or our customers, which could materially and adversely affect our business, financial condition and operating results.
|
·
|
Our articles of incorporation, bylaws and rights agreement as well as certain provisions of Michigan law may have an anti-takeover effect.
|
· | Achieved an increase in total revenue of $1.4 million during the first quarter of 2014 as compared to the first quarter of 2013 due to a $3.5 million increase in application services fees, a $1.4 million increase in software license fees, a $544,000 increase in professional services fees and a $306,000 increase in subscription fees partially offset by a $4.4 million decline in maintenance fees. |
· | Experienced a decline in operating margin to 5.2% during the first quarter of 2014 as compared to 7.3% during the first quarter of 2013 due primarily to the decline in the Covisint contribution margin and restructuring charges, offset in part, by an increase in the APM contribution margin (see “Business Segment Analysis” for additional information). |
· | Realized $10.0 million of net income compared to $10.5 million during the first quarter of last year. On a non-GAAP basis, excluding stock compensation expense, amortization of purchased software and other acquired intangibles, restructuring charges and certain advisory fees, net income increased $3.3 million or 17.5% in the first quarter of 2014 as compared to the first quarter of 2013. See the “GAAP to non-GAAP Reconciliation” section below for a complete reconciliation of net income and earnings per share. |
· | Professional services segment revenue increased $1.9 million or 5.5% during the first quarter of 2014 as compared to the first quarter of 2013. Contribution margin remained consistent with the prior year (see “Professional Services” for additional information). |
· | Covisint revenue increased $3.5 million or 17.1% from the first quarter of 2013. Contribution margin declined to negative 5.5% in the first quarter of 2014 from positive 12.5% during the first quarter of 2013 as we continue to invest in additional resources to support and grow the business. |
· | Incurred $5.1 million in restructuring costs as we move forward with our plans to eliminate approximately $80 million to $100 million of administrative and general and non-core operational costs over the next two years. |
· | Declared and paid the Company’s first quarterly cash dividend of $0.125 per share. |
· | Stock compensation expense. Our non-GAAP financial measures exclude the compensation expenses required to be recorded by GAAP for equity awards to employees and directors. Although this is a normal recurring expense for us, we believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding this expense, 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 in the current period. |
· | Amortization of acquired software and intangible assets. Our non-GAAP financial measures exclude costs associated with the amortization of acquired software and intangible assets. Although this is a normal recurring expense for us, we believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures excluding this expense, because these costs are fixed at the time of acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management in the current period. |
· | Restructuring charges. Our non-GAAP financial measures exclude restructuring charges, and any subsequent changes in estimates, as they relate to our ongoing corporate restructuring activities. We believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures excluding restructuring charges, in order to provide comparability and consistency with historical operating results. |
· | Goodwill impairment charge. Our non-GAAP financial measures exclude an impairment charge associated with a decline in the estimated fair value of our professional services business unit. We believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding goodwill impairment charges to provide comparability and consistency with historical operating results. |
· | Advisory fees associated with certain shareholder actions and business transformation. During the fourth quarter of fiscal 2013, in response to an unsolicited, nonbinding offer to purchase the outstanding shares of the Company from a shareholder, the Board of Directors announced its willingness to consider other viable offers. We continue to incur consultant fees to analyze the business, review additional requests for information from other interested parties and to implement business transformation plans. We believe it is useful in evaluating corporate performance during a particular time period to review the supplemental non-GAAP financial measures, excluding such costs, in order to provide comparability and consistency with historical operating results. |
|
Three Months Ended June 30,
|
|||||||
|
2013
|
2012
|
||||||
|
||||||||
Net income
|
$
|
9,967
|
$
|
10,468
|
||||
|
||||||||
Stock compensation (excluding restructuring stock compensation)
|
8,646
|
8,289
|
||||||
Amortization of purchased software
|
2,370
|
2,407
|
||||||
Amortization of acquired intangibles
|
1,793
|
1,963
|
||||||
Restructuring expenses
|
5,112
|
-
|
||||||
Advisory fees
|
1,156
|
-
|
||||||
|
||||||||
Total adjustments
|
19,077
|
12,659
|
||||||
|
||||||||
Income tax effect of adjustments
|
(6,627
|
)
|
(4,042
|
)
|
||||
|
||||||||
Net income before items
|
$
|
22,417
|
$
|
19,085
|
||||
|
||||||||
|
||||||||
Diluted earnings per share - GAAP
|
$
|
0.05
|
$
|
0.05
|
||||
|
||||||||
Stock compensation (excluding restructuring stock compensation)
|
0.04
|
0.04
|
||||||
Amortization of purchased software
|
0.01
|
0.01
|
||||||
Amortization of acquired intangibles
|
0.01
|
0.01
|
||||||
Restructuring expenses
|
0.02
|
-
|
||||||
Advisory fees
|
0.01
|
-
|
||||||
|
||||||||
Total adjustments
|
0.09
|
0.06
|
||||||
|
||||||||
Income tax effect of adjustments
|
(0.03
|
)
|
(0.02
|
)
|
||||
|
||||||||
Diluted earnings per share before items
|
$
|
0.10
|
$
|
0.09
|
||||
|
||||||||
Diluted shares outstanding
|
219,694
|
221,396
|
|
QUARTER ENDED
|
YEAR ENDED
|
||||||||||||||||||
|
JUNE 30,
2012 |
SEPTEMBER 30,
2012 |
DECEMBER 31,
2012 |
MARCH 31,
2013 |
MARCH 31,
2013 |
|||||||||||||||
|
||||||||||||||||||||
NET INCOME (LOSS)
|
$
|
10,468
|
$
|
10,594
|
$
|
25,340
|
$
|
(63,653
|
)
|
$
|
(17,251
|
)
|
||||||||
|
||||||||||||||||||||
STOCK COMPENSATION (EXCLUDING RESTRUCTURING STOCK COMPENSATION)
|
8,289
|
6,890
|
5,484
|
11,014
|
31,677
|
|||||||||||||||
AMORTIZATION OF PURCHASED SOFTWARE
|
2,407
|
2,372
|
2,420
|
2,405
|
9,604
|
|||||||||||||||
AMORTIZATION OF ACQUIRED INTANGIBLES
|
1,963
|
1,939
|
1,871
|
1,808
|
7,581
|
|||||||||||||||
RESTRUCTURING EXPENSES
|
12,001
|
12,001
|
||||||||||||||||||
GOODWILL IMPAIRMENT
|
71,840
|
71,840
|
||||||||||||||||||
ADVISORY FEES
|
146
|
2,651
|
2,797
|
|||||||||||||||||
|
||||||||||||||||||||
TOTAL ADJUSTMENTS
|
12,659
|
11,201
|
9,921
|
101,719
|
135,500
|
|||||||||||||||
INCOME TAX EFFECT OF ADJUSTMENTS
|
(4,042
|
)
|
(3,489
|
)
|
(3,002
|
)
|
(19,887
|
)
|
(30,420
|
)
|
||||||||||
|
||||||||||||||||||||
NON-GAAP NET INCOME
|
$
|
19,085
|
$
|
18,306
|
$
|
32,259
|
$
|
18,179
|
$
|
87,829
|
||||||||||
|
||||||||||||||||||||
DILUTED EARNINGS PER SHARE - GAAP
|
$
|
0.05
|
$
|
0.05
|
$
|
0.12
|
$
|
(0.30
|
)
|
$
|
(0.08
|
)
|
||||||||
|
||||||||||||||||||||
RECALCULATED USING DILUTIVE SHARES
|
$
|
0.05
|
$
|
0.05
|
$
|
0.12
|
$
|
(0.29
|
)
|
$
|
(0.08
|
)
|
||||||||
|
||||||||||||||||||||
STOCK COMPENSATION (EXCLUDING RESTRUCTURING STOCK COMPENSATION)
|
0.04
|
0.03
|
0.03
|
0.05
|
0.14
|
|||||||||||||||
AMORTIZATION OF PURCHASED SOFTWARE
|
0.01
|
0.01
|
0.01
|
0.01
|
0.04
|
|||||||||||||||
AMORTIZATION OF ACQUIRED INTANGIBLES
|
0.01
|
0.01
|
0.01
|
0.01
|
0.03
|
|||||||||||||||
RESTRUCTURING EXPENSES
|
-
|
-
|
-
|
0.05
|
0.05
|
|||||||||||||||
GOODWILL IMPAIRMENT
|
-
|
-
|
-
|
0.33
|
0.33
|
|||||||||||||||
ADVISORY FEES
|
-
|
-
|
0.00
|
0.01
|
0.01
|
|||||||||||||||
|
||||||||||||||||||||
TOTAL ADJUSTMENTS
|
0.06
|
0.05
|
0.05
|
0.46
|
0.62
|
|||||||||||||||
INCOME TAX EFFECT OF ADJUSTMENTS
|
(0.02
|
)
|
(0.02
|
)
|
(0.01
|
)
|
(0.09
|
)
|
(0.14
|
)
|
||||||||||
|
||||||||||||||||||||
NON-GAAP DILUTED EPS
|
$
|
0.09
|
$
|
0.08
|
$
|
0.15
|
$
|
0.08
|
$
|
0.40
|
||||||||||
|
||||||||||||||||||||
DILUTED SHARES OUTSTANDING
|
221,396
|
219,970
|
216,872
|
218,778
|
219,580
|
|
Software Solutions
|
Unallocated
Expenses |
||||||||||||||||||||||||||||||||||
Three Months Ended:
|
APM
|
MF
|
CP
|
UF
|
Total
|
PS
|
AS
|
& Eliminations (1)
|
Total
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
June 30, 2013
|
||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Total revenues
|
$
|
73,449
|
$
|
73,259
|
$
|
10,545
|
$
|
9,830
|
$
|
167,083
|
$
|
36,986
|
$
|
24,101
|
$
|
(654
|
)
|
$
|
227,516
|
|||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Operating expenses
|
74,046
|
19,176
|
10,314
|
5,170
|
108,706
|
30,632
|
25,423
|
50,991
|
215,752
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Contribution / operating margin
|
$
|
(597
|
)
|
$
|
54,083
|
$
|
231
|
$
|
4,660
|
$
|
58,377
|
$
|
6,354
|
$
|
(1,322
|
)
|
$
|
(51,645
|
)
|
$
|
11,764
|
|||||||||||||||
|
||||||||||||||||||||||||||||||||||||
Margin %
|
(0.8
|
%)
|
73.8
|
%
|
2.2
|
%
|
47.4
|
%
|
34.9
|
%
|
17.2
|
%
|
(5.5
|
%)
|
N/A
|
|
5.2
|
%
|
||||||||||||||||||
(1) |
Unallocated expenses for fiscal 2014 include $5.1 million in restructuring expenses. See note 10 for additional information.
|
|||||||||||||||||||||||||||||||||||
June 30, 2012
|
||||||||||||||||||||||||||||||||||||
Total revenues
|
$ |
71,169
|
$ |
79,889
|
$ |
8,994
|
$ |
10,478
|
$ |
170,530
|
$ |
35,044
|
$ |
20,587
|
$ |
-
|
$ |
226,161
|
||||||||||||||||||
Operating expenses
|
76,096
|
22,845
|
9,689
|
5,419
|
114,049
|
28,920
|
18,016
|
48,613
|
209,598
|
|||||||||||||||||||||||||||
Contribution / operating margin
|
$ |
(4,927
|
) | $ |
57,044
|
$ |
(695
|
) | $ |
5,059
|
$ |
56,481
|
$ |
6,124
|
$ |
2,571
|
$ |
(48,613
|
) | $ |
16,563
|
|||||||||||||||
Margin %
|
(6.9
|
%) |
71.4
|
% |
(7.7
|
%) |
48.3
|
% |
33.1
|
% |
17.5
|
% |
12.5
|
% | N/A |
7.3
|
% |
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Revenue
|
||||||||||||
Software license fees
|
$
|
22,011
|
$
|
22,357
|
(1.5
|
)%
|
||||||
Maintenance fees
|
23,704
|
20,765
|
14.2
|
|||||||||
Subscription fees
|
20,132
|
19,852
|
1.4
|
|||||||||
Professional services fees
|
7,602
|
8,195
|
(7.2
|
)
|
||||||||
Total revenue
|
73,449
|
71,169
|
3.2
|
|||||||||
|
||||||||||||
Operating expenses
|
74,046
|
76,096
|
(2.7
|
)
|
||||||||
|
||||||||||||
Contribution margin
|
$
|
(597
|
)
|
$
|
(4,927
|
)
|
87.9
|
%
|
||||
|
||||||||||||
Contribution margin %
|
(0.8
|
%)
|
(6.9
|
%)
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
39,910
|
$
|
40,058
|
||||
Europe and Africa
|
19,433
|
19,653
|
||||||
Other international operations
|
14,106
|
11,458
|
||||||
Total APM segment revenue
|
$
|
73,449
|
$
|
71,169
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Revenue
|
||||||||||||
Software license fees
|
$
|
9,732
|
$
|
9,050
|
7.5
|
%
|
||||||
Maintenance fees
|
63,458
|
70,546
|
(10.0
|
)
|
||||||||
Professional services fees
|
69
|
293
|
(76.5
|
)
|
||||||||
Total revenue
|
73,259
|
79,889
|
(8.3
|
)
|
||||||||
|
||||||||||||
Operating expenses
|
19,176
|
22,845
|
(16.1
|
)
|
||||||||
|
||||||||||||
Contribution margin
|
$
|
54,083
|
$
|
57,044
|
(5.2
|
)%
|
||||||
|
||||||||||||
Contribution margin %
|
73.8
|
%
|
71.4
|
%
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
38,559
|
$
|
46,208
|
||||
Europe and Africa
|
20,889
|
19,638
|
||||||
Other international operations
|
13,811
|
14,043
|
||||||
Total Mainframe segment revenue
|
$
|
73,259
|
$
|
79,889
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Revenue
|
||||||||||||
Software license fees
|
$
|
2,196
|
$
|
793
|
176.9
|
%
|
||||||
Maintenance fees
|
4,127
|
4,130
|
(0.1
|
)
|
||||||||
Subscription fees
|
653
|
627
|
4.1
|
|||||||||
Professional services fees
|
3,569
|
3,444
|
3.6
|
|||||||||
Total revenue
|
10,545
|
8,994
|
17.2
|
|||||||||
|
||||||||||||
Operating expenses
|
10,314
|
9,689
|
6.5
|
|||||||||
|
||||||||||||
Contribution margin
|
$
|
231
|
$
|
(695
|
)
|
133.2
|
%
|
|||||
|
||||||||||||
Contribution margin %
|
2.2
|
%
|
(7.7
|
%)
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
5,316
|
$
|
4,104
|
||||
Europe and Africa
|
2,575
|
1,867
|
||||||
Other international operations
|
2,654
|
3,023
|
||||||
Total Changepoint segment revenue
|
$
|
10,545
|
$
|
8,994
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Revenue
|
||||||||||||
Software license fees
|
$
|
1,467
|
$
|
1,794
|
(18.2
|
)%
|
||||||
Maintenance fees
|
7,239
|
7,508
|
(3.6
|
)
|
||||||||
Professional services fees
|
1,124
|
1,176
|
(4.4
|
)
|
||||||||
Total revenue
|
9,830
|
10,478
|
(6.2
|
)
|
||||||||
|
||||||||||||
Operating expenses
|
5,170
|
5,419
|
(4.6
|
)
|
||||||||
|
||||||||||||
Contribution margin
|
$
|
4,660
|
$
|
5,059
|
(7.9
|
)%
|
||||||
|
||||||||||||
Contribution margin %
|
47.4
|
%
|
48.3
|
%
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
1,350
|
$
|
1,432
|
||||
Europe and Africa
|
6,989
|
7,246
|
||||||
Other international operations
|
1,491
|
1,800
|
||||||
Total Uniface segment revenue
|
$
|
9,830
|
$
|
10,478
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Software license fees
|
$
|
35,406
|
$
|
33,994
|
4.2
|
%
|
||||||
Maintenance fees
|
98,528
|
102,949
|
(4.3
|
)
|
||||||||
Subscription fees
|
20,785
|
20,479
|
1.5
|
|||||||||
Professional services fees
|
12,364
|
13,108
|
(5.7
|
)
|
||||||||
Total software solutions revenue
|
$
|
167,083
|
$
|
170,530
|
(2.0
|
)%
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
85,135
|
$
|
91,802
|
||||
Europe and Africa
|
49,886
|
48,404
|
||||||
Other international operations
|
32,062
|
30,324
|
||||||
Total software solutions revenue
|
$
|
167,083
|
$
|
170,530
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Professional services fees
|
$
|
36,986
|
$
|
35,044
|
5.5
|
%
|
||||||
|
||||||||||||
Operating expenses
|
30,632
|
28,920
|
5.9
|
|||||||||
|
||||||||||||
Contribution margin
|
$
|
6,354
|
$
|
6,124
|
3.8
|
%
|
||||||
|
||||||||||||
Contribution margin %
|
17.2
|
%
|
17.5
|
%
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
36,648
|
$
|
35,028
|
||||
Europe and Africa
|
50
|
-
|
||||||
Other international operations
|
288
|
16
|
||||||
Total professional services segment revenue
|
$
|
36,986
|
$
|
35,044
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
|||||||||||
|
2013
|
2012
|
% Change
|
|||||||||
Application services fees
|
$
|
24,101
|
$
|
20,587
|
17.1
|
%
|
||||||
|
||||||||||||
Operating expenses
|
25,423
|
18,016
|
41.1
|
|||||||||
|
||||||||||||
Contribution margin
|
$
|
(1,322
|
)
|
$
|
2,571
|
(151.4
|
)%
|
|||||
|
||||||||||||
Contribution margin %
|
(5.5
|
%)
|
12.5
|
%
|
|
Three Months Ended
|
|||||||
|
June 30,
|
|||||||
|
2013
|
2012
|
||||||
United States
|
$
|
20,834
|
$
|
18,014
|
||||
Europe and Africa
|
1,789
|
970
|
||||||
Other international operations
|
1,478
|
1,603
|
||||||
Total application services segment revenue
|
$
|
24,101
|
$
|
20,587
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Cost of software license fees
|
$
|
5,406
|
$
|
4,825
|
12.0
|
%
|
||||||
|
||||||||||||
Percentage of software license fees
|
15.3
|
%
|
14.2
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Cost of maintenance fees
|
$
|
8,221
|
$
|
8,946
|
(8.1
|
)%
|
||||||
|
||||||||||||
Percentage of maintenance fees
|
8.3
|
%
|
8.7
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Cost of subscription fees
|
$
|
8,147
|
$
|
7,393
|
10.2
|
%
|
||||||
|
||||||||||||
Percentage of subscription fees
|
39.2
|
%
|
36.1
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Cost of professional services
|
$
|
40,349
|
$
|
42,301
|
(4.6
|
)%
|
||||||
|
||||||||||||
Percentage of professional services fees
|
82.9
|
%
|
87.8
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Cost of application services
|
$
|
26,211
|
$
|
21,125
|
24.1
|
%
|
||||||
|
||||||||||||
Capitalized internal software costs
|
$
|
(1,950
|
)
|
$
|
(3,404
|
)
|
(42.7
|
)
|
||||
|
||||||||||||
Cost of application services expensed
|
$
|
24,261
|
$
|
17,721
|
36.9
|
%
|
||||||
|
||||||||||||
Percentage of application services fees
|
100.7
|
%
|
86.1
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Technology development and support costs incurred
|
$
|
30,331
|
$
|
31,940
|
(5.0
|
)%
|
||||||
|
||||||||||||
Capitalized internal software costs
|
(3,796
|
)
|
(5,443
|
)
|
(30.3
|
)
|
||||||
|
||||||||||||
Technology development and support costs expensed
|
$
|
26,535
|
$
|
26,497
|
0.1
|
%
|
||||||
|
||||||||||||
Technology development and support costs expensed as a percentage of software solutions revenue
|
15.9
|
%
|
15.5
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Sales and marketing costs
|
$
|
59,493
|
$
|
62,190
|
(4.3
|
)%
|
||||||
|
||||||||||||
Percentage of software solutions revenue
|
35.6
|
%
|
36.5
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Administrative and general expenses
|
$
|
38,228
|
$
|
39,725
|
(3.8
|
)%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Interest income
|
$
|
544
|
$
|
570
|
(4.6
|
)%
|
||||||
Interest expense
|
(286
|
)
|
(571
|
)
|
49.9
|
|||||||
Other
|
(56
|
)
|
53
|
(205.7
|
)
|
|||||||
Other income, net
|
$
|
202
|
$
|
52
|
288.5
|
%
|
|
Three Months Ended
|
|||||||||||
|
June 30,
|
%
|
||||||||||
|
2013
|
2012
|
Change
|
|||||||||
Income tax provision
|
$
|
1,999
|
$
|
6,147
|
(67.5
|
)%
|
||||||
|
||||||||||||
Effective tax rate
|
16.7
|
%
|
37.0
|
%
|
|
APM
|
MF
|
CP
|
UF
|
PS
|
AS
|
Total
|
|||||||||||||||||||||
Goodwill as of March 31, 2013
|
$
|
469,947
|
$
|
140,557
|
$
|
22,079
|
$
|
21,280
|
$
|
42,794
|
$
|
25,385
|
$
|
722,042
|
||||||||||||||
|
||||||||||||||||||||||||||||
Effect of foreign currency translation
|
2,758
|
-
|
-
|
-
|
-
|
-
|
2,758
|
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
Goodwill as of June 30, 2013
|
$
|
472,705
|
$
|
140,557
|
$
|
22,079
|
$
|
21,280
|
$
|
42,794
|
$
|
25,385
|
$
|
724,800
|
·
|
Our ability to achieve sales productivity at a level to achieve the profitability in the forecast period.
|
·
|
Failure of our billable staff to meet their utilization or rate targets.
|
·
|
Our ability to hire and retain sales, technology and management personnel.
|
·
|
Future negative changes in the U.S. economy.
|
·
|
Increased competition and pricing pressures within the professional services market.
|
Period
|
Total number of shares purchased
|
Average price paid per share
|
Total number of shares purchased as part of publicly announced plans
|
Approximate dollar value of shares that may yet be purchased under the plans or programs (1)
|
||||||||||||
|
||||||||||||||||
For the month ended April 30, 2013
|
220,000
|
$
|
11.76
|
220,000
|
$
|
140,436,000
|
||||||||||
|
||||||||||||||||
For the month ended May 31, 2013
|
80,000
|
11.80
|
80,000
|
139,492,000
|
||||||||||||
|
||||||||||||||||
For the month ended June 30, 2013
|
-
|
-
|
-
|
139,492,000
|
||||||||||||
|
||||||||||||||||
Total
|
300,000
|
$
|
11.77
|
300,000
|
(1) | Our purchases of common stock may occur on the open market or in negotiated or block transactions based upon market and business conditions. Unless terminated earlier or extended by resolution of our Board of Directors, the Discretionary Plan will expire when we have repurchased all shares authorized for repurchase thereunder. The maximum amount of repurchase activity under the Discretionary Plan continues to be limited on a daily basis to 25% of the average trading volume of our common stock for the previous four week period. In addition, no purchases are made during our self-imposed trading black-out periods in which the Company and our insiders are prohibited from trading in our common shares. Our standard quarterly black-out period commences 10 business days prior to the end of each quarter and terminates one full market day following the public release of our operating results for the period. We reserve the right to change the timing and volume of our repurchases at any time without notice. For further details regarding the Discretionary Plan, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”. |
Exhibit
|
|
|
Number
|
Description of Document
|
|
|
|
|
10.148
|
Form of Stock Option Agreement – 3 Year Performance (as of May 2013) (Company’s 2013 Form 10-K)
|
|
|
|
|
10.149
|
Form of Severance Agreement with Robert C. Paul, Joseph R. Angileri, Daniel S. Follis, Jr. and Laura L. Fournier (Company’s 2013 Form 10-K)
|
|
|
|
|
10.150
|
Form of Covisint Stock Option Agreement for Nonemployee Directors (Company’s 2013 Form 10-K)
|
|
|
|
|
Agreement and General Release with Laura L. Fournier
|
||
|
|
|
Independent Registered Public Accounting Firm’s Awareness Letter
|
||
|
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
|
||
|
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act.
|
||
|
|
|
Certification pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) of the Securities Exchange Act.
|
||
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase 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
|
|
|
COMPUWARE CORPORATION
|
|
|
|
|
|
Date:
|
August 6, 2013
|
By: |
/s/ Robert C. Paul
|
|
|
|
|
|
|
Robert C. Paul
|
|
|
|
President and | |
Chief Executive Officer | |||
|
|
(principal executive officer)
|
|
|
|
|
|
Date:
|
August 6, 2013
|
By: |
/s/ Joseph R. Angileri
|
|
|
|
|
|
|
Joseph R. Angileri
|
|
|
|
Chief Financial Officer and
|
|
|
|
Treasurer
|
|
|
|
(principal financial officer and
principal accounting officer)
|
1.
|
Employment End Date, Notice Period Pay and Benefits. The Employee’s duties and responsibilities as an employee of Compuware will terminate on June 16, 2013 (the “Employment End Date”). Medical, Vision, Dental, and Life Insurance coverage will cease as of 11:59 PM, June 30, 2013. Short Term Disability, Long Term Disability and all other Company benefits cease as of 11:59 PM on, June 15, 2013. The Company will reimburse Employee for Employee’s payments of premiums for COBRA continuation coverage pursuant to Section 2 below.
|
2.
|
Severance Compensation and Benefits. In return for the Employee’s execution and non-revocation of this Agreement no later than 30 days following the Employment End Date, the Company agrees to provide the Employee with the following:
|
3.
|
Employment Agreement. The Employee agrees that the surviving terms of her Employment Agreement shall remain in full force and effect.
|
4. | Release of Claims. In consideration of the Company entering into this Agreement and the promises and benefits provided herein, the Employee hereby fully, forever, irrevocably and unconditionally releases, remises and discharges the Company and its current and former officers, directors, stockholders, corporate affiliates, subsidiaries, predecessors, successors, agents, employees and attorneys (the “Released Parties”) from any and all claims, actions and causes of action, whether now known or unknown, that Employee has or at any other time had, or shall or may have against those Released Parties based upon or arising out of any matter, cause, fact, thing, act or omission whatsoever occurring or existing at any time up to and including the Effective Date of this Agreement, including, but not limited to, any common law or statutory claims relating to Employee’s employment or termination from employment such as claims of wrongful termination in violation of public policy or under any other theory, breach of contract, fraud, negligent misrepresentation, defamation, infliction of emotional distress, or any other tort claim; claims of discrimination or harassment based upon national origin, race, age, sex, disability, sexual orientation or retaliation under the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Americans With Disabilities Act, or any other applicable Federal, State, or local law prohibiting discrimination; claims under the federal Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act or any other federal, state or local law, rule, regulation or ordinance that is applicable to Employee’s employment with the Company; or claims for vacation, sick or personal leave pay, short term or long term disability benefits, or payment pursuant to any practice, policy, handbook or manual of the Company. Employee acknowledges that she has no lawsuits, claims or actions pending in Employee’s name or behalf against the Released Parties, and also expressly waives any and all remedies that may be available under any statute or the common law, including, without limitation, back pay, front pay, other damages, attorney’s fees, court costs and reinstatement. Employee’s release of claims does not apply to those actions or proceedings that are not waivable by law, any claims which arise after the Effective Date of this Agreement, or to a charge filed with an administrative agency empowered to investigate those claims; however, subject to applicable law, Employee specifically waives any right to recover money damages or relief of any kind which may result from the filing of a charge with any administrative agency. |
5.
|
Resignation from Company Offices, Cooperation in Subsequent Litigation and Non-Disparagement. Employee agrees that she will take all reasonably necessary actions to effectuate her resignation no later than an effective date of June 16, 2013, from all corporate positions or offices, including any directorships she may hold with any Company subsidiary. Employee further agrees that she will assist and cooperate with the Company in connection with the defense or prosecution of any claim that may be made against or by the Company, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations, or proceedings relate to services performed or required to be performed by Employee, pertinent knowledge possessed by Employee, or any act or omission by Employee. Employee further agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this paragraph. Employee further agrees to not make statements or representations in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations.
|
6.
|
Amendment. This Agreement shall be binding upon the parties and may not be modified in any manner, except by an instrument in writing of concurrent or subsequent date signed by duly authorized representatives of the parties hereto.
|
7.
|
Waiver of Rights. No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
|
8.
|
Validity. Should any provision of this Agreement be declared or be determined by any court of competent jurisdiction to be illegal or invalid, excluding the general release language, the validity of the remaining parts, terms or provisions shall not be affected thereby and said illegal or invalid part, term or provision shall be deemed not to be a part of this Agreement. However, if the general release language is found to be invalid, the Employee agrees to execute a valid release of the claims which are the subject of this Agreement.
|
9.
|
Confidentiality. The Employee understands and agrees that as a condition for payment to the Employee of the items in Section 2, the terms and contents of this Agreement and the contents of the negotiations and discussions resulting in this Agreement, shall be maintained as confidential by the Employee and the Employee’s spouse, advisors and attorneys and shall not be disclosed except to the extent required by federal or state law or as otherwise agreed to in writing by the Company.
|
10.
|
Acknowledgments and Revocation. The Employee affirms that no other promises or agreements of any kind have been made to or with the Employee by any person or entity to cause the Employee to sign this Agreement and that she understands the terms herein. The Employee acknowledges that the Employee has been given at least twenty-one (21) days to consider this Agreement, and that the Company has advised the Employee to consult with an attorney of her own choosing prior to signing this Agreement. Employee acknowledges that if Employee signs this Agreement before the running of the twenty-one (21) day waiting period, Employee has done so with full knowledge and understanding that Employee was entitled to the full twenty-one (21) days within which to consider this Agreement and that any decision on Employee’s part not to utilize the full twenty-one (21) day waiting period is done of Employee’s own volition and not at the urging of the Company. The Employee further understands that Employee may revoke this Agreement for a period of seven (7) days after the Employee signs it. Any revocation within this period must be submitted in writing to the Human Resources department, Compuware Corporation, One Campus Martius, Detroit, Michigan 48226. This Agreement shall not be effective or enforceable until the expiration of the revocation period ( the “Effective Date”).
|
11.
|
Applicable Law. This Agreement shall be interpreted and construed in accordance with the laws of the State of Michigan, without regard to conflict of laws provisions, and Employee consents to jurisdiction of the courts of the State of Michigan for the resolution of any matter arising under this Agreement.
|
12.
|
Entire Agreement. This Agreement contains and constitutes the entire understanding and agreement between the parties hereto with respect to Employee’s termination of employment with the Company, separation pay and the settlement of claims against the Company and cancels all previous oral and written negotiations, agreements, commitments and writings in connection therewith except the surviving terms of the Employment Agreement referenced in Paragraph 3.
|
13.
|
Code Section 409A and Other Tax Considerations. As a highly compensated individual (as defined by Section 105(h) the Internal Revenue Code), any COBRA continuation coverage premiums paid or reimbursed by the Company will be considered taxable income. It is intended that payments and benefits provided under this Agreement shall be in compliance with or exempt from Internal Revenue Code Section 409A and the regulations and guidance thereunder (“Code Section 409A”), and the terms of this Agreement are to be interpreted and construed accordingly. The parties agree to negotiate in good faith and jointly execute an amendment to this Agreement if necessary to comply with Code Section 409A. In no event shall the Company be responsible for any tax or penalty owed by the Employee, the Employee’s spouse or beneficiary with regard to any payments or benefits provided under this Agreement. Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A, and the terms “separation from service”, “termination of employment”, “employment termination”, and phrases of like kind are intended to mean “separation from service” as defined by Code Section 409A. In no event may the Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Notwithstanding any provision in this Agreement to the contrary, if Employee is determined to constitute a Code Section 409A “Specified Employee” at the time of separation from service, all or part of any payment hereunder that is not then exempt from Code Section 409A shall be held (if then required under Code Section 409A), and paid in an aggregated lump sum on the first day of the seventh month following Employee’s separation from service, or the date of Employee’s death, if earlier. Any remaining payments shall be paid on their regularly scheduled payment dates. In signing this Agreement, Employee acknowledges that the Company has the right to withhold from Employee’s compensation or require Employee to remit sufficient funds to satisfy applicable withholding for income and employment tax requirements related to the compensation provided hereunder.
|
/s/ Laura L. Fournier
|
6/14/13
|
||
Laura L. Fournier
|
Date
|
||
|
|
||
/s/ Daniel S. Follis
|
6/14/13
|
||
Company Representative
|
Date
|
1. | I have reviewed this quarterly report on Form 10-Q of Compuware Corporation (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
1. | I have reviewed this quarterly report on Form 10-Q of Compuware Corporation (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Financing Receivables (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Financing Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aged analysis of products and loans financing receivables | The following is an aged analysis of our products and loans financing receivables based on invoice dates as of June 30, 2013 and March 31, 2013 (in thousands):
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Stock Benefit Plans and Stock-Based Compensation
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Stock Benefit Plans and Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Benefit Plans and Stock-Based Compensation | Note 6 – Stock Benefit Plans and Stock-Based Compensation Stock Benefit Plans The Company has the following stock benefit plans: (1) the Amended and Restated 2007 Long Term Incentive Plan ("2007 LTIP") allows the Company's Compensation Committee to grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based cash or restricted stock unit awards and cash incentive awards to employees and directors of the Company; (2) the Employee Stock Purchase Plan allows participating U.S. and Canadian employees the right to have up to 10% of their compensation withheld to purchase Company common stock at a 5% discount; and (3) the Employee Stock Ownership Plan and Trust/401(k) Plan ("ESOP/401(k)"), which includes a qualified cash or deferred arrangement as described under Section 401(k) of the Internal Revenue Code, allows the Company to make contributions to the ESOP/401(k) for the benefit of substantially all U.S. employees. Covisint Corporation ("Covisint"), a subsidiary of the Company, maintains a stock benefit plan referred to as the 2009 Long-Term Incentive Plan ("2009 Covisint LTIP") allowing the board of directors of Covisint to grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based cash or restricted stock unit awards and cash incentive awards to employees and directors of Covisint and the Company. ESOP/401(k) The Company provides a matching program for the 401(k) component of the ESOP/401(k). The Company matches 33% of employees' 401(k) contributions up to 2% of eligible earnings. Matching contributions by the Company vest 100% when an employee attains three years of service with the Company. The Company expensed $1.3 million related to this program during both the first quarter of 2014 and the first quarter of 2013. Stock Option Activity Options that Vest Based on Service Conditions Only A summary of activity for options that vest based on service conditions only under the Company's stock-based compensation plans as of June 30, 2013, and changes during the three months then ended is presented below (shares and intrinsic value in thousands):
The average fair value of stock options vested during the three months ending June 30, 2013 and 2012 was $4.19 and $4.21 per share, respectively. Options that Vest Based on both Performance and Service Conditions ("Performance Options") As of June 30, 2013, 3.3 million stock options that vest based on both service and performance conditions were outstanding. The performance vesting conditions for these options are based on company-wide revenue and earnings targets. As of June 30, 2013, it is deemed probable that the performance targets for approximately 479,000 of these options will be achieved. Expense totaling $327,000 was recorded in the condensed consolidated statement of comprehensive income related to these stock options during the first quarter of 2014. A summary of activity for options that vest based on the achievement of both service and performance conditions under the Company's stock-based compensation plans as of June 30, 2013, and changes during the three months then ended is presented below (shares and intrinsic value in thousands):
The weighted average fair value of stock options granted during the periods and the assumptions used to estimate those values using the Black-Scholes option pricing model were as follows:
(1) In January 2013, our Board of Directors announced its intention to begin paying cash dividends totaling $0.50 per share annually, to be paid quarterly beginning in the first quarter of fiscal 2014. Prior to that, the Company had never paid a dividend or announced any intentions to pay a dividend. Restricted Stock Units and Performance-Based Stock Awards Activity A summary of non-vested restricted stock units ("RSUs") and performance-based stock awards ("PSAs" and collectively "Non-vested RSU") activity under the Company's LTIP as of June 30, 2013, and changes during the three months then ended is presented below (shares and intrinsic value in thousands):
Approximately 31,000 PSAs with performance conditions based on company-wide revenue and earnings targets were outstanding as of June 30, 2013. It is not deemed probable that these targets will be achieved as of June 30, 2013. During the first quarter of 2014, the Company paid its first quarterly dividend of $0.125 per share. In connection with this, approximately 45,000 dividend equivalent shares were issued to participants holding non-vested RSUs as of the dividend record date. Stock Awards Compensation Stock award compensation expense was allocated as follows (in thousands):
As of June 30, 2013, it is expected that total unrecognized compensation cost of $27.4 million, net of estimated forfeitures, related to nonvested equity awards that are expected to vest will be recognized over a weighted-average period of approximately 1.90 years. Covisint Corporation 2009 Long-Term Incentive Plan As of June 30, 2013, there were 4.3 million stock options outstanding from the 2009 Covisint LTIP, which reflects the Covisint board of directors approved 30-for-1 stock split on May 23, 2013. The majority of these options will vest only if, prior to August 26, 2015, Covisint completes an initial public offering ("IPO") or if there is a change in control of the Covisint segment ("Covisint"). Certain employees who received stock options from the 2009 Covisint LTIP were also awarded PSAs from the Company's 2007 LTIP. As of June 30, 2013, there were 1.5 million PSAs outstanding. Approximately 1.1 million of these PSAs will vest only if Covisint does not complete an IPO or a change in control transaction by August 25, 2015 and the Covisint business meets a pre-defined revenue target for any four consecutive calendar quarters ending prior to August 26, 2015 or upon a change in control of Compuware. The remaining PSAs will vest only if Covisint completes an IPO or change in control by August 25, 2015. As of June 30, 2013, unrecognized compensation cost related to Covisint options totaled approximately $24.7 million. This expense will become recognizable upon an IPO or change in control of Covisint, with a cumulative catch-up in the period in which the IPO occurs. It is expected that approximately 70 percent of this expense will be incurred in the fiscal year in which an IPO or change in control of Covisint occurs. If an IPO or change of control occurs prior to August 26, 2015, the PSAs granted to employees with Covisint stock options will be cancelled. As a result, expense will be recognized for the Covisint stock options, but all prior expense taken for the PSAs for employees with Covisint stock options will be reversed. |
Fair Value of Assets and Liabilities (Tables)
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Jun. 30, 2013
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Fair Value of Assets and Liabilities | The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis (in thousands):
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Fair Value of Assets and Liabilities (Details) (Recurring Basis [Member], USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
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Mar. 31, 2013
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Estimated Fair Value [Member]
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Assets: | ||
Cash equivalents - money market funds | $ 2,804 | $ 11,525 |
Liabilities: | ||
Foreign exchange derivatives | 124 | 31 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
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Assets: | ||
Cash equivalents - money market funds | 2,804 | 11,525 |
Liabilities: | ||
Foreign exchange derivatives | 0 | 0 |
Significant Other Observable Inputs (Level 2) [Member]
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Assets: | ||
Cash equivalents - money market funds | 0 | 0 |
Liabilities: | ||
Foreign exchange derivatives | 124 | 31 |
Significant Unobservable Inputs (Level 3) [Member]
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Assets: | ||
Cash equivalents - money market funds | 0 | 0 |
Liabilities: | ||
Foreign exchange derivatives | $ 0 | $ 0 |
Foreign Currency Transactions and Derivatives (Details) (USD $)
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3 Months Ended | 12 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Mar. 31, 2012
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Mar. 31, 2013
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Foreign Currency Transactions and Derivatives [Abstract] | ||||
Foreign currency net gains or (losses) resulting from assets and liabilities denominated in non-local currency and current inter-company balances | $ (544,000) | $ 737,000 | ||
Hedging transaction net (loss) from foreign exchange derivative contracts | 10,000 | (213,000) | ||
Derivative, maturity date | Jul. 31, 2013 | Apr. 30, 2012 | ||
Amount of derivative contracts maturing | 3,200,000 | 1,800,000 | ||
Amount of derivative contracts to purchase | $ 23,800,000 | $ 15,500,000 |
Financing Receivables (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
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Jun. 30, 2013
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Mar. 31, 2013
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Financing Receivables [Abstract] | ||
Minimum finance receivable deferred payment term | 1 year | |
Annual interest rate on loan receivable (in hundredths) | 7.00% | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
0-29 days past invoice date | $ 1,202 | $ 3,311 |
30-90 days past invoice date | 991 | 679 |
Greater than 90 days past invoice date | 474 | 1,503 |
Unbilled | 45,256 | 46,430 |
Total financing receivables | 47,923 | 51,923 |
Allowance for credit losses on financing receivables | 170,000 | 179,000 |
Pass Rating [Member]
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Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
0-29 days past invoice date | 1,202 | 3,311 |
30-90 days past invoice date | 991 | 679 |
Greater than 90 days past invoice date | 304 | 1,324 |
Unbilled | 45,256 | 46,430 |
Total financing receivables | 47,753 | 51,744 |
Pass Rating [Member] | Software products [Member]
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Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
0-29 days past invoice date | 1,202 | 3,311 |
30-90 days past invoice date | 991 | 679 |
Greater than 90 days past invoice date | 304 | 1,324 |
Unbilled | 41,929 | 42,659 |
Total financing receivables | 44,426 | 47,973 |
Pass Rating [Member] | Loans [Member]
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Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Unbilled | 3,327 | 3,771 |
Total financing receivables | 3,327 | 3,771 |
Watch Rating [Member] | Software products [Member]
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Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Greater than 90 days past invoice date | 170 | 179 |
Total financing receivables | $ 170 | $ 179 |
Financing Receivables
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Jun. 30, 2013
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Financing Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Receivables | Note 2 – Financing Receivables In accordance with ASU No. 2010-20 "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses," the Company allows deferred payment terms that exceed one year for customers purchasing licenses (perpetual or time-based) for our software products and the related maintenance services ("multi-year deferred payment arrangements"). A financing receivable exists when the license transfers to the customer or the related maintenance service has been provided (i.e., revenue recognition has occurred) prior to the due date of the related receivable. Our products financing receivables primarily consist of the perpetual license portion of outstanding multi-year deferred payment arrangements. As of June 30, 2013, our loans receivable balance consisted of a note due from ForeSee Results, Inc. The terms of the note require quarterly payments of principal and interest through March 31, 2015 at an annual interest rate of 7.0%. The following is an aged analysis of our products and loans financing receivables based on invoice dates as of June 30, 2013 and March 31, 2013 (in thousands):
As of June 30, 2013 and March 31, 2013, the allowance for credit losses on our financing receivables was $170,000 and $179,000. |
Fair Value of Assets and Liabilities
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Jun. 30, 2013
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Fair Value of Assets and Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Assets and Liabilities | Note 4 - Fair Value of Assets and Liabilities The Company reports its money market funds and foreign exchange derivatives at fair value on a recurring basis using the following fair value hierarchy: (1) Level 1 - quoted prices in active markets for identical assets or liabilities; (2) Level 2 – inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and (3) Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis (in thousands):
Non-financial assets such as goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. See note 7 of the condensed consolidated financial statements for further information. |
Goodwill, Capitalized Software and Other Intangible Assets
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Jun. 30, 2013
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Goodwill, Capitalized Software and Other Intangible Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill, Capitalized Software and Other Intangible Assets | Note 7 – Goodwill, Capitalized Software and Other Intangible Assets Goodwill The Company has the following reporting units: Application Performance Management ("APM"), Mainframe ("MF"), Changepoint ("CP"), Uniface ("UF"), Professional Services ("PS") and Covisint Application Services ("AS" or "Covisint"). The changes in the carrying amount of goodwill by reporting unit during the three months ended June 30, 2013 are summarized as follows (in thousands):
Capitalized software and other intangible assets The components of the Company's capitalized software and other intangible assets are as follows (in thousands):
Capitalized software includes the costs of internally developed software technology and software technology purchased through acquisitions. Internally developed capitalized software costs and capitalized purchased software technology are being amortized over periods up to five years. Customer relationship agreements are related to acquisition activity and are being amortized over periods up to ten years. Other amortized intangible assets include amortizable trademarks and patents relating to acquisition activity and are being amortized over periods up to three years. Unamortized trademarks were acquired as part of the Covisint and Changepoint acquisitions. These trademarks are deemed to have an indefinite life. Amortization of intangible assets Amortization expense of capitalized software, customer relationship and other intangible assets was as follows (in thousands):
Capitalized software amortization related to our on-premises software is reported as "cost of software license fees", amortization related to our hosted software is reported as "cost of subscription fees" and amortization related to our application services is reported as "cost of application services" in the condensed consolidated statements of comprehensive income. Customer relationship amortization related to our software solutions segments is reported as "sales and marketing" and amortization related to our application services segment is reported as "cost of application services" in the condensed consolidated statements of comprehensive income. Amortization expense associated with trademarks and trade names related to our software solutions segments is reported as "cost of license fees" and amortization related to our application services segment is reported as "cost of application services" in the condensed consolidated statements of comprehensive income. Based on the capitalized software, customer relationship and other intangible assets recorded through June 30, 2013, the annual amortization expense over the next five fiscal years and thereafter is expected to be as follows (in thousands):
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Computation of Earnings per Common Share
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Jun. 30, 2013
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Computation of Earnings per Common Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Earnings per Common Share | Note 5 - Computation of Earnings per Common Share Earnings per common share data were computed as follows (in thousands, except per share amounts):
During the three months ended June 30, 2013 and 2012, stock awards to purchase 2.2 million and 14.5 million shares, respectively, were excluded from the diluted earnings per share calculation because they were anti-dilutive and stock awards to purchase 5.4 million and 1.4 million shares, respectively, were excluded from the calculation because the performance conditions for vesting had not yet been met. See note 6 for a discussion of options with performance conditions and performance based stock awards. |
Computation of Earnings per Common Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Basic earnings per share: | ||
Numerator: Net income | $ 9,967 | $ 10,468 |
Denominator: | ||
Weighted-average common shares outstanding (in shares) | 213,640,000 | 217,510,000 |
Basic earnings per share (in dollars per share) | $ 0.05 | $ 0.05 |
Diluted earnings per share: | ||
Numerator: Net income | $ 9,967 | $ 10,468 |
Denominator: | ||
Weighted-average common shares outstanding (in shares) | 213,640,000 | 217,510,000 |
Dilutive effect of stock awards (in shares) | 6,054,000 | 3,886,000 |
Total shares (in shares) | 219,694,000 | 221,396,000 |
Diluted earnings per share (in dollars per share) | $ 0.05 | $ 0.05 |
Anti-dilutive shares related to stock awards excluded from EPS calculation (in shares) | 2,200,000 | 14,500,000 |
Performance shares not included in EPS (in shares) | 5,400,000 | 1,400,000 |
Segment Information, Geographic operations (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Mar. 31, 2013
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Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | $ 227,516 | $ 226,161 | |
Long-lived assets | 1,102,815 | 1,106,338 | |
United States [Member]
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Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 141,963 | 144,844 | |
Long-lived assets | 881,760 | 888,032 | |
Austria [Member]
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Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Long-lived assets | 203,004 | 201,224 | |
Europe and Africa [Member]
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Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 51,725 | 49,374 | |
Other international operations [Member]
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Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Revenues | 33,828 | 31,943 | |
Long-lived assets | $ 18,051 | $ 17,082 |