UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2002
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number 000-23783
MICROMUSE INC.
(Exact name of registrant as specified in its charter)
| DELAWARE |
94-3288385 | |
| (State or other jurisdiction of |
(IRS Employer | |
| incorporation or organization) |
Identification No.) |
139 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94107
(415) 538-9090
(Address, including ZIP code, and telephone number)
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
74,969,725 shares of Common Stock, $0.01 par value, were outstanding as of January 31, 2003
MICROMUSE INC.
| Page | ||||
| PART I—Financial Information |
||||
| Item 1. |
Condensed Consolidated Financial Statements: |
|||
| Condensed Consolidated Balance Sheets as of December 31, 2002 and September 30, 2002 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 3. |
32 | |||
| Item 4. |
33 | |||
| PART II—Other Information |
||||
| Item 1. |
34 | |||
| Item 2. |
34 | |||
| Item 3. |
34 | |||
| Item 4. |
34 | |||
| Item 5. |
34 | |||
| Item 6. |
35 | |||
| 36 | ||||
| 37 | ||||
2
Part I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MICROMUSE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| December 31, 2002 |
September 30, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
135,470 |
|
$ |
117,218 |
| ||
| Short-term investments |
|
37,031 |
|
|
42,126 |
| ||
| Billed receivables, net |
|
12,755 |
|
|
18,386 |
| ||
| Prepaid expenses and other current assets |
|
5,663 |
|
|
5,760 |
| ||
| Total current assets |
|
190,919 |
|
|
183,490 |
| ||
| Property and equipment, net |
|
8,245 |
|
|
9,534 |
| ||
| Long-term investments |
|
28,236 |
|
|
28,293 |
| ||
| Goodwill and other intangible assets, net |
|
41,369 |
|
|
40,666 |
| ||
| $ |
268,769 |
|
$ |
261,983 |
| |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
2,853 |
|
$ |
2,374 |
| ||
| Accrued expenses |
|
26,086 |
|
|
25,205 |
| ||
| Income taxes payable |
|
6,723 |
|
|
6,652 |
| ||
| Deferred revenue |
|
49,515 |
|
|
36,524 |
| ||
| Total current liabilities |
|
85,177 |
|
|
70,755 |
| ||
| Stockholders’ equity |
||||||||
| Preferred stock; $0.01 par value; 5,000 shares authorized no shares issued and outstanding |
|
— |
|
|
— |
| ||
| Common stock; $0.01 par value; 200,000 shares authorized; 75,279 and 75,194 shares outstanding as of December 31, 2002 and September 30, 2002, respectively |
|
753 |
|
|
752 |
| ||
| Additional paid-in capital |
|
196,459 |
|
|
196,048 |
| ||
| Treasury stock |
|
(2,657 |
) |
|
(2,657 |
) | ||
| Accumulated comprehensive loss |
|
(1,622 |
) |
|
(899 |
) | ||
| Accumulated deficit |
|
(9,341 |
) |
|
(2,016 |
) | ||
| Total stockholders’ equity |
|
183,592 |
|
|
191,228 |
| ||
| $ |
268,769 |
|
$ |
261,983 |
| |||
See accompanying notes to the condensed consolidated financial statements
3
MICROMUSE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three months ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| Revenues: |
||||||||
| License |
$ |
13,423 |
|
$ |
23,216 |
| ||
| Maintenance and services |
|
13,674 |
|
|
16,831 |
| ||
| Total revenues |
|
27,097 |
|
|
40,047 |
| ||
| Cost of revenues: |
||||||||
| License |
|
1,076 |
|
|
1,595 |
| ||
| Maintenance and services |
|
3,289 |
|
|
5,208 |
| ||
| Total cost of revenues |
|
4,365 |
|
|
6,803 |
| ||
| Gross profit |
|
22,732 |
|
|
33,244 |
| ||
| Operating expenses: |
||||||||
| Sales and marketing |
|
14,442 |
|
|
18,085 |
| ||
| Research and development |
|
7,421 |
|
|
7,570 |
| ||
| General and administrative |
|
4,066 |
|
|
4,938 |
| ||
| Amortization of goodwill and other intangible assets |
|
1,552 |
|
|
2,767 |
| ||
| Purchased in-process research and development |
|
142 |
|
|
— |
| ||
| Restructuring costs |
|
3,329 |
|
|
— |
| ||
| Executive recruiting costs |
|
— |
|
|
449 |
| ||
| Total operating expenses |
|
30,952 |
|
|
33,809 |
| ||
| Loss from operations |
|
(8,220 |
) |
|
(565 |
) | ||
| Other income, net |
|
1,380 |
|
|
1,608 |
| ||
| Income (loss) before income taxes |
|
(6,840 |
) |
|
1,043 |
| ||
| Income tax provision |
|
485 |
|
|
427 |
| ||
| Net income (loss) |
$ |
(7,325 |
) |
$ |
616 |
| ||
| Per share data: |
||||||||
| Basic net income (loss) |
$ |
(0.10 |
) |
$ |
0.01 |
| ||
| Diluted net income (loss) |
$ |
(0.10 |
) |
$ |
0.01 |
| ||
| Weighted average shares used in computing: |
||||||||
| Basic net income (loss) per share |
|
75,241 |
|
|
74,043 |
| ||
| Diluted net income (loss) per share |
|
75,241 |
|
|
78,246 |
| ||
See accompanying notes to the condensed consolidated financial statements
4
MICROMUSE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three months ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ |
(7,325 |
) |
$ |
616 |
| ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
|
3,654 |
|
|
5,066 |
| ||
| Purchased in-process research & development |
|
142 |
|
|
— |
| ||
| Non-cash compensation expense related to restructuring |
|
54 |
|
|
— |
| ||
| Non-cash compensation expense related to issuance of warrant |
|
— |
|
|
170 |
| ||
| Tax benefit related to exercise of stock options |
|
203 |
|
|
— |
| ||
| Changes in operating assets and liabilities net of acquired amounts: |
||||||||
| Billed receivables, net |
|
5,888 |
|
|
2,003 |
| ||
| Prepaid expenses and other current assets |
|
208 |
|
|
2,789 |
| ||
| Accounts payable |
|
457 |
|
|
508 |
| ||
| Accrued expenses |
|
438 |
|
|
(2,970 |
) | ||
| Income taxes payable |
|
65 |
|
|
688 |
| ||
| Deferred revenue |
|
12,483 |
|
|
(621 |
) | ||
| Net cash provided by operating activities |
|
16,267 |
|
|
8,249 |
| ||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
|
(216 |
| |||||