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, 2004
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) |
915 Murphy Ranch Road, Milpitas, CA 95035
(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 by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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.
| Class |
Number of Shares Outstanding at July 31, 2004 | |
| Common Stock, par value $0.001 | 24,536,596 |
PHOENIX TECHNOLOGIES LTD.
FORM 10-Q
| Page | ||||
| PART I. | FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements |
|||
| Consolidated Balance Sheets as of June 30, 2004 and September 30, 2003 |
3 | |||
| Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2004 and 2003 |
4 | |||
| Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2004 and 2003 |
5 | |||
| 6 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. | 30 | |||
| Item 4. | 31 | |||
| PART II. | OTHER INFORMATION | |||
| Item 1. | 32 | |||
| Item 6. | ||||
| 33 | ||||
| 33 | ||||
| 34 | ||||
Page 2
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
PHOENIX TECHNOLOGIES LTD.
(in thousands, except par value)
(Unaudited)
| June 30, 2004 |
September 30, 2003 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 42,054 | $ | 26,601 | ||||
| Short-term investments |
20,667 | 20,645 | ||||||
| Accounts receivable, net of allowances of $1,643 and $1,496 at June 30, 2004 and September 30, 2003, respectively |
20,596 | 22,761 | ||||||
| Prepaid royalties and maintenance |
2,221 | 2,528 | ||||||
| Deferred income taxes |
542 | 537 | ||||||
| Other current assets |
3,417 | 4,708 | ||||||
| Total current assets |
89,497 | 77,780 | ||||||
| Property and equipment, net |
4,826 | 7,131 | ||||||
| Computer software costs, net |
8,760 | 11,275 | ||||||
| Goodwill, net |
13,433 | 12,933 | ||||||
| Intangible assets, net |
455 | 507 | ||||||
| Prepaid royalties - non current |
2,771 | 4,437 | ||||||
| Other assets |
2,411 | 2,400 | ||||||
| Total assets |
$ | 122,153 | $ | 116,463 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,479 | $ | 1,392 | ||||
| Accrued compensation and related liabilities |
5,018 | 7,669 | ||||||
| Deferred revenue |
14,196 | 3,296 | ||||||
| Income taxes payable |
3,350 | 4,185 | ||||||
| Accrued restructuring charges - current |
736 | 1,910 | ||||||
| Other accrued liabilities |
3,390 | 4,156 | ||||||
| Total current liabilities |
28,169 | 22,608 | ||||||
| Accrued restructuring charges - non current |
1,955 | 1,410 | ||||||
| Other liabilities |
1,448 | 1,054 | ||||||
| Total liabilities |
31,572 | 25,072 | ||||||
| Commitments and Contingencies (Note 6) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.100 par value, 500 shares authorized, none issued or outstanding |
— | — | ||||||
| Common stock, $0.001 par value, 60,000 shares authorized, 31,732 and 31,477 shares issued, 24,536 and 24,281 shares outstanding at June 30, 2004 and September 30, 2003, respectively |
32 | 31 | ||||||
| Additional paid-in capital |
181,222 | 179,730 | ||||||
| Deferred compensation |
(801 | ) | (675 | ) | ||||
| Retained earnings |
2,211 | 4,344 | ||||||
| Accumulated other comprehensive loss |
(1,640 | ) | (1,596 | ) | ||||
| Less: Cost of treasury stock (7,196 shares at June 30, 2004 and September 30, 2003) |
(90,443 | ) | (90,443 | ) | ||||
| Total stockholders’ equity |
90,581 | 91,391 | ||||||
| Total liabilities and stockholders’ equity |
$ | 122,153 | $ | 116,463 | ||||
See notes to unaudited consolidated financial statements
Page 3
PHOENIX TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Three months ended June 30, |
Nine months ended June 30, |
||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||||
| Revenues |
$ | 23,100 | $ | 20,535 | $ | 62,272 | $ | 64,146 | |||||||
| Cost of revenues |
3,718 | 4,451 | 11,475 | 13,172 | |||||||||||
| Gross Margin |
19,382 | 16,084 | 50,797 | 50,974 | |||||||||||
| Operating expenses: |
|||||||||||||||
| Research and development |
5,918 | 6,682 | 17,209 | 20,884 | |||||||||||
| Sales and marketing |
8,285 | 8,411 | 23,817 | 25,377 | |||||||||||
| General and administrative |
3,326 | 4,069 | 9,384 | 10,835 | |||||||||||
| Amortization of acquired intangible assets |
17 | 18 | 51 | 53 | |||||||||||
| Stock-based compensation |
72 | 61 | 177 | 192 | |||||||||||
| Restructuring and related charges |
199 | — | 139 | 6,014 | |||||||||||
| Total operating expenses |
17,817 | 19,241 | 50,777 | 63,355 | |||||||||||
| Income (loss) from operations |
1,565 | (3,157 | ) | 20 | (12,381 | ) | |||||||||
| Interest and other income, net |
239 | 232 | (128 | ) | 454 | ||||||||||
| Income (loss) before income taxes |
1,804 | (2,925 | ) | (108 | ) | (11,927 | ) | ||||||||
| Income tax expense (benefit) |
892 | 14,298 | 2,025 | 11,147 | |||||||||||
| Net income (loss) |
$ | 912 | $ | (17,223 | ) | $ | (2,133 | ) | $ | (23,074 | ) | ||||
| Earnings (loss) per share: |
|||||||||||||||
| Basic |
$ | 0.04 | $ | (0.71 | ) | $ | (0.09 | ) | $ | (0.94 | ) | ||||
| Diluted |
$ | 0.04 | $ | (0.71 | ) | $ | (0.09 | ) | $ | (0.94 | ) | ||||
| Shares used in Earnings (loss) per share calculation: |
|||||||||||||||
| Basic |
24,471 | 24,233 | 24,413 | 24,538 | |||||||||||
| Diluted |
24,814 | 24,233 | 24,413 | 24,538 | |||||||||||
See notes to unaudited consolidated financial statements
Page 4
PHOENIX TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Nine months ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (2,133 | ) | $ | (23,074 | ) | ||
| Reconciliation to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
5,594 | 6,016 | ||||||
| Stock-based compensation |
177 | 192 | ||||||
| Loss from disposal of fixed assets |
268 | 44 | ||||||
| Deferred income tax |
(5 | ) | 12,189 | |||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
2,165 | (5,511 | ) | |||||
| Prepaid royalties and maintenance |
1,973 | 1,458 | ||||||
| Other assets |
412 | (1,952 | ) | |||||
| Accounts payable |
87 | 467 | ||||||
| Accrued compensation and related liabilities |
(2,651 | ) | (1,291 | ) | ||||
| Deferred revenue |
10,900 | 317 | ||||||
| Income taxes |
33 | (4,120 | ) | |||||
| Accrued restructuring charges |
(607 | ) | 1,912 | |||||
| Other accrued liabilities |
(396 | ) | (435 | ) | ||||
| Net cash provided by (used in) operating activities |
15,817 | (13,788 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Proceeds from sale of investments |
143,122 | 294,389 | ||||||
| Purchases of investments |
(143,144 | ) | (268,525 | ) | ||||
| Proceeds from the sale of fixed assets |
38 | — | ||||||
| Purchases of property and equipment |
(1,028 | ) | (3,024 | ) | ||||
| Acquisition of businesses, net of cash acquired |
(500 | ) | — | |||||
| Net cash provided by (used in) investing activities |
(1,512 | ) | 22,840 | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from stock purchases under stock option and stock purchase plans |
1,191 | 960 | ||||||
| Repurchase of common stock |
— | (9,697 | ) | |||||
| Net cash provided by (used in) financing activities |
1,191 | (8,737 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents |
(43 | ) | (108 | ) | ||||
| Net increase in cash and cash equivalents |
15,453 | 207 | ||||||
| Cash and cash equivalents at beginning of period |
26,601 | 25,156 | ||||||
| Cash and cash equivalents at end of period |
$ | 42,054 | $ | 25,363 | ||||
See notes to unaudited consolidated financial statements
Page 5
PHOENIX TECHNOLOGIES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements as of June 30, 2004 and for the three and nine months ended June 30, 2004 and 2003 have been