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 March 31, 2004
| ¨ | 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 incorporation or organization) |
(IRS Employer 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 x No ¨
78,270,124 shares of Common Stock, $0.01 par value, were outstanding as of May 3, 2004
MICROMUSE INC.
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This Form 10-Q includes restated financial information for certain periods indicated below in this report that ended prior to our fiscal quarter that began on October 1, 2003.
The Company has restated its consolidated financial statements for the fiscal years ended September 30, 2001 and 2002 and for the quarters ended December 31, 2000 through June 30, 2003. Accordingly, the financial statements for those fiscal periods described above that have been included in the Company’s previous filings with the Securities and Exchange Commission in 2003 or earlier or included in previous announcements in 2003 or earlier should not be relied upon.
The Company’s Form 10-K for the fiscal year ended September 30, 2003, filed with the SEC on May 17, 2004, contains restated information for all of the above periods to which the restatement applies and other information relating to the restatement, in the Form 10-K Item 6 “Selected Financial Data,” Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Restatement of Financial Statements,” Notes 2 and 11 of the Notes to Consolidated Financial Statements included in Item 8, and Item 9A, “Controls and Procedures.”
Certain information concerning the restatement relating to the periods included in this report is contained in Part I to this Form 10-Q in Note 2 below to the Condensed Consolidated Financial Statements (Unaudited), Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 4, “Controls and Procedures.” This information should be read in conjunction with relevant information in the Company’s most recent Form 10-K referred to above.
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MICROMUSE INC.
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| March 31, 2004 |
September 30, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 119,592 | $ | 89,385 | ||||
| Short-term investments |
16,095 | 33,196 | ||||||
| Accounts receivable, net |
17,182 | 13,439 | ||||||
| Prepaid expenses and other current assets |
8,822 | 6,269 | ||||||
| Total current assets |
161,691 | 142,289 | ||||||
| Property and equipment, net |
6,326 | 5,976 | ||||||
| Long-term investments |
59,486 | 67,529 | ||||||
| Goodwill, net |
50,956 | 49,032 | ||||||
| Other intangible assets, net |
9,768 | 12,861 | ||||||
| $ | 288,227 | $ | 277,687 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 4,609 | $ | 6,849 | ||||
| Accrued expenses |
25,738 | 20,387 | ||||||
| Income taxes payable |
6,366 | 6,368 | ||||||
| Deferred revenue |
44,473 | 40,327 | ||||||
| Total current liabilities |
81,186 | 73,931 | ||||||
| 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; 78,670 and 78,544 shares outstanding as of March 31, 2004 and September 30, 2003, respectively |
787 | 785 | ||||||
| Additional paid-in capital |
212,267 | 210,697 | ||||||
| Treasury stock |
(2,657 | ) | (2,657 | ) | ||||
| Accumulated other comprehensive loss |
(1,782 | ) | (1,548 | ) | ||||
| Accumulated deficit |
(1,574 | ) | (3,521 | ) | ||||
| Total stockholders’ equity |
207,041 | 203,756 | ||||||
| $ | 288,227 | $ | 277,687 | |||||
See accompanying notes to the condensed consolidated financial statements
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MICROMUSE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three months ended March 31, |
Six months ended March 31, |
|||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||
| (As Restated) | (As Restated) | |||||||||||||
| Revenues: |
||||||||||||||
| License |
$ | 20,288 | $ | 18,534 | $ | 40,607 | $ | 32,157 | ||||||
| Maintenance and services |
17,997 | 13,582 | 34,867 | 27,362 | ||||||||||
| Total revenues |
38,285 | 32,116 | 75,474 | 59,519 | ||||||||||
| Cost of revenues: |
||||||||||||||
| License |
1,542 | 1,302 | 2,887 | 2,084 | ||||||||||
| Maintenance and services |
2,749 | 2,427 | 5,316 | 5,522 | ||||||||||
| Amortization of developed technology |
1,532 | 1,050 | 2,988 | 2,036 | ||||||||||
| Total cost of revenues |
5,823 | 4,779 | 11,191 | 9,642 | ||||||||||
| Gross profit |
32,462 | 27,337 | 64,283 | 49,877 | ||||||||||
| Operating expenses: |
||||||||||||||
| Sales and marketing |
15,809 | 16,446 | 31,485 | 31,397 | ||||||||||
| Research and development |
8,245 | 7,026 | 16,019 | 14,309 | ||||||||||
| General and administrative |
7,878 | 4,434 | 15,141 | 8,676 | ||||||||||
| Stock based compensation |
438 | — | 553 | — | ||||||||||
| Amortization of other intangible assets |
47 | 355 | 95 | 921 | ||||||||||
| Restructuring costs |
— | — | — | 3,140 | ||||||||||
| Total operating expenses |
32,417 | 28,261 | 63,293 | 58,443 | ||||||||||
| Income (loss) from operations |
45 | (924 | ) | 990 | (8,566 | ) | ||||||||
| Other income, net |
732 | 1,252 | 1,714 | 2,685 | ||||||||||
| Income (loss) before income taxes |
777 | 328 | 2,704 | (5,881 | ) | |||||||||
| Income tax provision |
218 | 552 | 757 | 1,043 | ||||||||||
| Net income (loss) |
$ | 559 | $ | (224 | ) | $ | 1,947 | $ | (6,924 | ) | ||||
| Per share data: |
||||||||||||||
| Basic net income (loss) |
$ | 0.01 | $ | 0.00 | $ | 0.02 | $ | (0.09 | ) | |||||
| Diluted net income (loss) |
$ | 0.01 | $ | 0.00 | $ | 0.02 | $ | (0.09 | ) | |||||
| Weighted average shares used in computing: |
||||||||||||||
| Basic net income (loss) per share |
78,670 | 75,744 | 78,645 | 75,490 | ||||||||||
| Diluted net income (loss) per share |
82,546 | 75,744 | 82,267 | 75,490 | ||||||||||
See accompanying notes to the condensed consolidated financial statements
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MICROMUSE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (As Restated) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 1,947 | $ | (6,924 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
5,642 | 6,682 | ||||||
| Purchased in process research & development |
— | 142 | ||||||
| Non-cash stock-based compensation |
553 | — | ||||||
| Non-cash compensation expense related to restructuring |
— | 54 | ||||||
| Tax benefit related to exercise of stock options |
464 | 623 | ||||||
| Accounts receivable, net |
(3,743 | ) | 9,497 | |||||
| Prepaid expenses and other current assets |
(2,554 | ) | (1,213 | ) | ||||
| Accounts payable |
(2,240 | ) | 1,888 | |||||
| Accrued expenses |
5,351 | (4,377 | ) | |||||
| Income taxes payable |
(2 | ) | 40 | |||||
| Deferred revenue |
4,146 | 11,469 | ||||||
| Net cash provided by operating activities |
9,564 | 17,881 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(2,767 | ) | (464 | ) | ||||
| Investment purchases |
(103,837 | ) | (54,073 | ) | ||||
| Investment sales |
128,981 | 37,333 | ||||||
| Acquisition of business, net of cash received |
(425 | ) | (1,196 | ) | ||||
| Repayment of long term debt assumed upon acquisition |
— | (855 | ) | |||||
| Cash provided by (used in) investing activities |
21,952 | (19,255 | ) | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock |
555 | 2,206 | ||||||
| Net cash provided by financing activities |
555 | 2,206 | ||||||
| Effects of exchange rate changes on cash and cash equivalents |
(1,864 | ) | (782 | ) | ||||
| Net increase in cash and cash equivalents |
30,207 | 50 | ||||||
| Cash and cash equivalents at beginning of period |
89,385 | 117,218 | ||||||