UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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For the quarterly period ended September 30, 2002 | ||
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OR | ||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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For the transition period from__________ to __________ | ||
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COMMISSION FILE NO. 000-26937 | ||
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| QUEST SOFTWARE, INC. | |||
| (Exact name of registrant as specified in its charter) | |||
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| California |
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33-0231678 | |
| (State or other jurisdiction of |
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(I.R.S. Employer | |
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| 8001 Irvine Center Drive |
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92618 | |
| (Address of principal executive offices) |
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(Zip code) | |
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| Registrant’s telephone number, including area code: (949) 754-8000 | |||
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.
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No |
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The number of shares outstanding of the Registrant’s Common Stock, no par value, as of November 1, 2002 was 90,804,540.
QUEST SOFTWARE, INC.
FORM 10-Q
TABLE OF CONTENTS
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Page |
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| PART I. |
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| Item 1. |
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Condensed Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002 (unaudited) |
3 |
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4 | |
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5 | |
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6 | |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
7 |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
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| Item 3. |
26 | |
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| Item 4. |
27 | |
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| PART II. |
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| Item 1. |
28 | |
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| Item 5. |
28 | |
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| Item 6. |
28 | |
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| 29 | ||
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2
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
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December 31, |
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September 30, |
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| ASSETS |
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| Current assets: |
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Cash and cash equivalents |
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$ |
30,279 |
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$ |
49,690 |
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Short-term marketable securities available for sale |
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23,039 |
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25,070 |
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Accounts receivable, net |
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35,783 |
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27,787 |
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Prepaid expenses and other current assets |
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8,230 |
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9,786 |
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Deferred income taxes |
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12,085 |
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11,009 |
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Total current assets |
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109,416 |
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123,342 |
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| Property and equipment, net |
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57,496 |
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46,240 |
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| Long-term marketable securities |
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153,838 |
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166,982 |
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| Goodwill |
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191,233 |
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195,777 |
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| Amortizing intangible assets, net |
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11,473 |
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8,673 |
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| Deferred income taxes |
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10,902 |
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10,902 |
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| Other assets |
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5,767 |
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4,754 |
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Total assets |
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$ |
540,125 |
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$ |
556,670 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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Accounts payable |
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5,495 |
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4,805 |
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Accrued compensation |
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12,764 |
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12,123 |
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Other accrued expenses |
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21,720 |
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18,293 |
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Income taxes payable |
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3,243 |
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2,282 |
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Deferred revenue |
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50,395 |
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54,321 |
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Total current liabilities |
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93,617 |
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91,824 |
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| Long-term liabilities and other |
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5,140 |
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3,486 |
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| Commitments and contingencies (Note 11) |
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| Shareholders’ equity: |
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Preferred stock, no par value, 10,000 shares authorized; no shares issued or outstanding |
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— |
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— |
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Common stock, no par value, 150,000 shares authorized; 89,226 and 90,393 issued and outstanding at December 31, 2001 and September 30, 2002, respectively |
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537,081 |
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548,718 |
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Accumulated deficit |
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(78,973 |
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(71,836 |
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Accumulated other comprehensive income |
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522 |
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1,692 |
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Notes receivable from sale of common stock |
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(17,262 |
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(17,214 |
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Net shareholders’ equity |
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441,368 |
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461,360 |
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Total liabilities and shareholders’ equity |
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$ |
540,125 |
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$ |
556,670 |
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See accompanying notes to condensed consolidated financial statements.
3
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2001 |
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2002 |
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2001 |
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2002 |
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| Revenues: |
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Licenses |
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$ |
37,584 |
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$ |
39,880 |
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$ |
135,171 |
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$ |
117,059 |
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Services |
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19,059 |
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23,203 |
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52,071 |
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68,954 |
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Total revenues |
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56,643 |
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63,083 |
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187,242 |
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186,013 |
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| Cost of revenues: |
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Licenses |
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948 |
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774 |
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2,961 |
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2,313 |
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Services |
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4,920 |
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4,290 |
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14,034 |
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13,195 |
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Amortization of purchased intangible assets |
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1,894 |
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1,288 |
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5,834 |
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3,978 |
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Total cost of revenues |
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7,762 |
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6,352 |
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22,829 |
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19,486 |
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| Gross profit |
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48,881 |
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56,731 |
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164,413 |
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166,527 |
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| Operating expenses: |
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Sales and marketing |
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29,593 |
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30,934 |
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91,675 |
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92,324 |
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Research and development |
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15,262 |
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14,508 |
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44,649 |
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44,473 |
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General and administrative |
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5,809 |
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6,287 |
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18,248 |
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18,415 |
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Other compensation costs and intangibles amortization |
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16,418 |
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941 |
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47,869 |
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2,673 |
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Total operating expenses |
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67,082 |
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52,670 |
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202,441 |
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157,885 |
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| Income (loss) from operations |
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(18,201 |
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4,061 |
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(38,028 |
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8,642 |
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| Other income, net |
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2,654 |
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1,450 |
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6,143 |
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5,342 |
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| Loss on sale of aircraft |
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— |
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(790 |
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— |
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(790 |
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| Write-down of investments |
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— |
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— |
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(1,465 |
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(1,095 |
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| Income (loss) before income tax provision |
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(15,547 |
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4,721 |
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(33,350 |
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12,099 |
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| Income tax provision (benefit) |
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(4,706 |
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2,215 |
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5,223 |
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5,199 |
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| Net income (loss) |
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$ |
(10,841 |
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$ |
2,506 |
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$ |
(38,573 |
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$ |
6,900 |
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| Net income (loss) per share: |
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Basic |
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$ |
(0.12 |
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$ |
.03 |
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$ |
(0.44 |
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$ |
.08 |
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Diluted |
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$ |
(0.12 |
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$ |
.03 |
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$ |
(0.44 |
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$ |
.07 |
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| Weighted average shares: |
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Basic |
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88,299 |
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90,256 |
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87,613 |
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89,886 |
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Diluted |
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88,299 |
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92,195 |
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87,613 |
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92,645 |
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See accompanying notes to condensed consolidated financial statements.
4
QUEST SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Nine Months Ended |
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2001 |
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2002 |
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| Cash flows from operating activities: |
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Net income (loss) |
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$ |
(38,573 |
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$ |
6,900 |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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55,996 |
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16,927 |
&nb | ||||