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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 June 30, 2002
 
or
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period                 to                 .
 
Commission file number 0-17111
 

 
PHOENIX TECHNOLOGIES LTD.
(Exact name of Registrant as specified in its charter)
 
Delaware
 
04-2685985
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
411 East Plumeria Drive, San Jose, California 95134
(Address of principal executive offices, including zip code)
 
(408) 570-1000
(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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Common Stock, par value $.001

 
              26,224,488              

Class
 
Number of Shares
Outstanding at June 30, 2002
 


Table of Contents
 
PHOENIX TECHNOLOGIES LTD.
 
FORM 10-Q
INDEX
 
         
Page

PART I.
       
Item 1.
       
       
3
       
4
       
5
       
6
Item 2.
     
15
Item 3.
     
28
PART II.
       
Item 1.
     
29
Item 2.
     
29
Item 3.
     
29
Item 4.
     
29
Item 5.
     
29
Item 6.
       
       
29
       
29
 

2


Table of Contents
PART I.    FINANCIAL INFORMATION
 
ITEM 1.     Financial Statements
 
PHOENIX TECHNOLOGIES LTD.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
 
    
June 30, 2002

    
September 30, 2001

 
    
(unaudited)
        
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
  
$
46,206
 
  
$
62,084
 
Short-term investments
  
 
11,787
 
  
 
2,950
 
Accounts receivable, net of allowances of $2,176 and $2,374 at June 30, 2002 and September 30, 2001, respectively
  
 
27,637
 
  
 
21,527
 
Prepaid royalties and maintenance
  
 
2,312
 
  
 
1,443
 
Deferred income taxes
  
 
5,186
 
  
 
5,186
 
Other current assets
  
 
5,379
 
  
 
6,572
 
    


  


Total current assets
  
 
98,507
 
  
 
99,762
 
Property and equipment, net
  
 
9,629
 
  
 
10,793
 
Computer software costs, net
  
 
19,942
 
  
 
17,602
 
Goodwill and intangible assets, net
  
 
19,645
 
  
 
17,104
 
Deferred income taxes
  
 
8,743
 
  
 
8,743
 
Prepaid royalties
  
 
8,041
 
  
 
4,180
 
Other assets
  
 
2,280
 
  
 
2,427
 
    


  


Total assets
  
$
166,787
 
  
$
160,611
 
    


  


LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities:
                 
Accounts payable
  
$
1,483
 
  
$
2,949
 
Accrued compensation and related liabilities
  
 
9,991
 
  
 
9,918
 
Deferred revenue
  
 
7,881
 
  
 
5,088
 
Accrued acquisition costs
  
 
—  
 
  
 
1,802
 
Income taxes payable
  
 
1,473
 
  
 
3,201
 
Other accrued liabilities
  
 
5,243
 
  
 
4,378
 
    


  


Total current liabilities
  
 
26,071
 
  
 
27,336
 
Long-term obligations
  
 
1,126
 
  
 
638
 
    


  


Total liabilities
  
 
27,197
 
  
 
27,974
 
Minority interest
  
 
12,296
 
  
 
12,941
 
    


  


Stockholders’ equity:
                 
Preferred stock, $.10 par value, 500 shares authorized, none issued
  
 
—  
 
  
 
—  
 
Common stock, $.001 par value, 60,000 shares authorized, 31,208 and 30,114 shares issued, 26,224 and 25,239 shares outstanding at June 30, 2002 and September 30, 2001, respectively
  
 
31
 
  
 
30
 
Additional paid-in capital
  
 
177,299
 
  
 
165,396
 
Retained earnings
  
 
32,244
 
  
 
35,888
 
Accumulated other comprehensive income (loss)
  
 
(1,534
)
  
 
(1,878
)
Less: Cost of treasury stock (4,984 and 4,875 shares at June 30, 2002 and September 30, 2001, respectively)
  
 
(80,746
)
  
 
(79,740
)
    


  


Total stockholders’ equity
  
 
127,294
 
  
 
119,696
 
    


  


Total liabilities and stockholders’ equity
  
$
166,787
 
  
$
160,611
 
    


  


 
See notes to condensed consolidated financial statements

3


Table of Contents
PHOENIX TECHNOLOGIES LTD.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
    
Three months ended June 30,

    
Nine months ended June 30,

 
    
2002

  
2001

    
2002

    
2001

 
Revenues:
                                 
License fees
  
$
28,334
  
$
27,129
 
  
$
81,142
 
  
$
82,429
 
Services
  
 
3,517
  
 
4,605
 
  
 
10,887
 
  
 
13,841
 
    

  


  


  


Total revenues
  
 
31,851
  
 
31,734
 
  
 
92,029
 
  
 
96,270
 
    

  


  


  


Cost of revenues:
                                 
License fees
  
 
1,621
  
 
1,324
 
  
 
4,485
 
  
 
2,460
 
Services
  
 
1,554
  
 
3,982
 
  
 
4,791
 
  
 
11,372
 
Amortization of purchased technology
  
 
1,392
  
 
747
 
  
 
3,723
 
  
 
1,380
 
Restructuring related write-down and impairment of capitalized software
  
 
325
  
 
—  
 
  
 
1,172
 
  
 
—  
 
    

  


  


  


Total cost of revenues
  
 
4,892
  
 
6,053
 
  
 
14,171
 
  
 
15,212
 
    

  


  


  


Gross Margin
  
 
26,959
  
 
25,681
 
  
 
77,858
 
  
 
81,058
 
Operating expenses:
                                 
Research and development
  
 
8,899
  
 
11,886
 
  
 
26,737
 
  
 
34,324
 
Sales and marketing
  
 
10,330
  
 
8,894
 
  
 
29,875
 
  
 
28,680
 
General and administrative
  
 
5,890
  
 
5,902
 
  
 
17,390
 
  
 
17,719
 
Amortization of goodwill and acquired intangible assets
  
 
973
  
 
1,689
 
  
 
3,495
 
  
 
3,358
 
Stock-based compensation
  
 
8
  
 
379
 
  
 
690
 
  
 
1,004
 
Restructuring and related charges
  
 
—  
  
 
1,525
 
  
 
5,142
 
  
 
1,525
 
    

  


  


  


Total operating expenses
  
 
26,100
  
 
30,275
 
  
 
83,329
 
  
 
86,610
 
    

  


  


  


Income (loss) from operations
  
 
859
  
 
(4,594
)
  
 
(5,471
)
  
 
(5,552
)
Interest and other income, net
  
 
149
  
 
981
 
  
 
394
 
  
 
2,316
 
Gain on investment
  
 
—  
  
 
223
 
  
 
161
 
  
 
223
 
Minority interest
  
 
846
  
 
706
 
  
 
2,615
 
  
 
1,475
 
    

  


  


  


Income (loss) before income taxes
  
 
1,854
  
 
(2,684
)
  
 
(2,301
)
  
 
(1,538
)
Income tax expense (credit)
  
 
1,288
  
 
(996
)
  
 
1,343
 
  
 
(964
)
    

  


  


  


Net Income (loss)
  
$
566
  
$
(1,688
)
  
$
(3,644
)
  
$
(574
)
    

  


  


  


Earnings (loss) per share:
                                 
Basic
  
$
0.02
  
$
(0.07
)
  
$
(0.14
)
  
$
(0.02
)
Diluted
  
$
0.02
  
$
(0.07
)
  
$
(0.14
)
  
$
(0.02
)
Shares used in earnings (loss) per share calculation:
                                 
Basic
  
 
26,097
  
 
25,098
 
  
 
25,702
 
  
 
25,162
 
Diluted
  
 
26,817