INDUS INTERNATIONAL INC - 10-Q Quarterly Report

Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2003

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

Commission File Number: 0-22993

INDUS INTERNATIONAL, INC.

(Exact name of Registrant issuer as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		94-3273443 (I.R.S. Employer Identification No.)


3301 Windy Ridge Parkway, Atlanta, Georgia (Address of principal executive offices)		30339 (Zip code)

(770) 952-8444
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X)

As of February 5, 2004, the Registrant had outstanding 52,015,666 shares of Common Stock, $.001 par value per share.

TABLE OF CONTENTS


PART I: FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
	ITEM 4. CONTROLS AND PROCEDURES
PART II: OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
Exhibit Index
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

TABLE OF CONTENTS


			Page

Part I: Financial Information
Item	1.	Financial Statements (Unaudited):
		Condensed Consolidated Balance Sheets – December 31, 2003 and March 31, 2003		3
		Condensed Consolidated Statements of Operations – three and nine months ended December 31, 2003 and 2002		4
		Condensed Consolidated Statements of Cash Flows – nine months ended December 31, 2003 and 2002		5
		Notes to Condensed Consolidated Financial Statements		6
Item	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item	3.	Quantitative and Qualitative Disclosures about Market Risk		28
Item	4.	Controls and Procedures		29
Part II: Other Information
Item	1.	Legal Proceedings		30
Item	2.	Changes in Securities and Use of Proceeds		30
Item	3.	Defaults upon Senior Securities		30
Item	4.	Submission of Matters to a Vote of Security Holders		30
Item	5.	Other Information		30
Item	6.	Exhibits and Reports on Form 8-K		30
		Signature		32

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDUS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


			December 31, 2003			March 31, 2003

			(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	25,919		$	32,667
	Marketable securities			—			757
	Restricted cash, current			157			2,834
	Billed accounts receivable, net of allowance for doubtful accounts of $2,329 at December 31, 2003 and $4,375 at March 31, 2003			27,396			26,301
	Unbilled accounts receivable			6,174			12,841
	Income tax receivable			672			5,226
	Other current assets			4,109			8,634

		Total current assets		64,427			89,260
Property and equipment, net				34,340			38,088
Acquired intangible assets				11,793			13,258
Restricted cash, non-current				5,492			2,601
Investments and other assets				6,009			1,303

		Total assets	$	122,061		$	144,510

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Note payable		$	767		$	24,516
	Accounts payable			5,523			5,102
	Income tax payable			4,738			5,038
	Other accrued liabilities			18,443			20,568
	Current portion of obligations under capital leases			124			274
	Deferred revenue			42,818			50,604

		Total current liabilities		72,413			106,102
Note payable and other liabilities				18,424			9,974
Stockholders’ equity:
	Common stock			52			42
	Additional paid-in capital			149,260			135,279
	Treasury stock			(4,681	)		(4,681	)
	Deferred compensation			(48	)		(79	)
	Accumulated deficit			(114,632	)		(101,943	)
	Accumulated other comprehensive gain (loss)			1,273			(184	)

		Total stockholders’ equity		31,224			28,434

		Total liabilities and stockholders’ equity	$	122,061		$	144,510

See accompanying notes.

INDUS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)


			Three Months Ended						Nine Months Ended
			December 31,						December 31,

			2003			2002			2003			2002

Revenue:
	Software license fees		$	2,992		$	3,931		$	17,071		$	11,299
	Services:
		Support, Outsourcing and Hosting		15,281			9,778			44,342			28,138
		Consulting, Training and other		16,084			13,525			45,175			45,286

	Total services			31,365			23,303			89,517			73,424

Total revenue				34,357			27,234			106,588			84,723

Cost of revenue:
	Software license fees			63			574			441			2,884
	Services:
		Support, Outsourcing and Hosting		4,868			2,709			15,523			8,576
		Consulting, Training and other		11,081			9,557			33,626			31,724

	Total services			15,949			12,266			49,149			40,300

Total cost of revenue				16,012			12,840			49,590			43,184

Gross margin				18,345			14,394			56,998			41,539

Operating expenses:
	Research and development			7,944			10,157			27,258			33,037
	Sales and marketing			8,468			7,604			25,662			22,376
	General and administrative			5,004			1,554			15,529			10,379
	Restructuring expenses			11			775			34			4,804

		Total operating expenses		21,427			20,090			68,483			70,596

Loss from operations				(3,082	)		(5,696	)		(11,485	)		(29,057	)
Interest and other income (expense)				(87	)		276			(578	)		857

Loss before income taxes				(3,169	)		(5,420	)		(12,063	)		(28,200	)
Provision (benefit) for income taxes				33			482			626			(3,946	)

Net loss			$	(3,202	)	$	(5,902	)	$	(12,689	)	$	(24,254	)

Net loss per share:
Basic			$	(0.06	)	$	(0.17	)	$	(0.27	)	$	(0.69	)

Diluted			$	(0.06	)	$	(0.17	)	$	(0.27	)	$	(0.69	)

Shares used in computing per share data
Basic				51,915			35,205			47,659			35,192
Diluted				51,915			35,205			47,659			35,192

See accompanying notes.

INDUS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


				Nine Months Ended
				December 31,

				2003			2002

Cash flows from operating activities:
Net loss				$	(12,689	)	$	(24,254	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			8,248			6,633
		Changes in operating assets and liabilities:
			Billed accounts receivable		(400	)		(3,009	)
			Unbilled accounts receivable		6,742			6,140
			Other current assets		624			4,700
			Other accrued liabilities		(4,548	)		(481	)
			Deferred revenue		(8,390	)		(397	)
			Other operating assets and liabilities		5,084			(2,540	)

Net cash used in operating activities					(5,329	)		(13,208	)

Cash flows from investing activities:
	Purchase of marketable securities				(1,949	)		(34,967	)
	Sale of marketable securities				2,706			32,743
	Increase in restricted cash				(97	)		(5,012	)
	Acquisition of business				(6,938	)		—
	Capitalized software				(5,076	)		—
	Acquisition of property and equipment				(2,971	)		(2,805	)

Net cash used in investing activities					(14,325	)		(10,041	)

Cash flows from financing activities:
	Proceeds from issuance of note payable				11,254			—
	Payments of capital leases				(202	)		(168	)
	Proceeds from issuance of common stock				274			977
	Purchase of treasury stock				—			(2,500	)

Net cash provided by (used in) financing activities					11,326			(1,691	)

Effect of exchange rate differences on cash					1,580			1,405
Net decrease in cash and cash equivalents					(6,748	)		(23,535	)
Cash and cash equivalents at beginning of period					32,667			61,062

Cash and cash equivalents at end of period				$	25,919		$	37,527

Supplemental noncash financing activities:
	Capital leases addition			$	—		$	557

	Conversion of convertible notes into common stock			$	13,716		$	—

See accompanying notes.

INDUS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial information has been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s (“SEC”) rules and regulations. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position at December 31, 2003 and results of operations and cash flows for all periods presented have been made. The condensed consolidated balance sheet at March 31, 2003 has been derived from the audited consolidated financial statements at that date. Certain prior period amounts have been reclassified to conform to current period classifications.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the three-month period ended March 31, 2003 and the twelve-month period ended December 31, 2002 that are included in the Company’s 2003 Transition Report on Form 10-K as filed with the SEC. This report was filed as a result of the change in the Company’s fiscal year end from December 31 to March 31. The consolidated results of operations for the three and nine months ended December 31, 2003 are not necessarily indicative of the results to be expected for any subsequent quarter or period, or for the entire fiscal year ending March 31, 2004.

2. Stock Based Compensation

As permitted under SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, the Company accounts for stock based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and accordingly recognizes no compensation expense for the stock option grants as long as the exercise price is equal to or more than the fair value of the shares at the date of grant.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma net loss including pro forma compensation expense, net of tax for the three and nine months ended December 31, 2003 and 2002, respectively, is as follows (in thousands except per share amounts):


	Three Months Ended						Nine Months Ended
	December 31,						December 31,

	2003			2002			2003			2002

Net loss as reported	$	(3,202	)	$	(5,902	)	$	(12,689	)	$	(24,254	)
Add: Total stock-based compensation expense determined under the intrinsic value method		12			24			31			72
Deduct: Total stock-based compensation expense determined under fair-value based method for all awards		(1,322	)		(1,392	)		(2,832	)		(5,228	)

Pro forma net loss	$	(4,512	)	$	(7,270	)	$	(15,490	)	$	(29,410	)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents