UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
ACT OF 1934
For the quarterly period ended October 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-22369
BEA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0394711 | |
| (State or other jurisdiction of incorporation or organization) |
(I. R. S. Employer Identification No.) |
2315 North First Street
San Jose, California 95131
(Address of principal executive offices)
(408) 570-8000
(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 Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of November 30, 2004, there were approximately 402,399,424 shares of the Registrant’s common stock outstanding.
BEA SYSTEMS, INC.
| Page No. | ||||
| ITEM 1. |
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| 3 | ||||
| Condensed Consolidated Balance Sheets as of October 31, 2004 and January 31, 2004 |
4 | |||
| Condensed Consolidated Statements of Cash Flows for the nine months ended October 31, 2004 and 2003 |
5 | |||
| 6 | ||||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 | ||
| ITEM 3. |
43 | |||
| ITEM 4. |
45 | |||
| ITEM 1. |
47 | |||
| ITEM 2. |
47 | |||
| ITEM 5. |
48 | |||
| ITEM 6. |
48 | |||
| 50 | ||||
2
ITEM 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
| Three months ended October 31, |
Nine months ended October 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| License fees |
$ | 114,914 | $ | 128,229 | $ | 351,366 | $ | 377,923 | ||||||||
| Services |
149,485 | 123,853 | 437,956 | 356,501 | ||||||||||||
| Total revenues |
264,399 | 252,082 | 789,322 | 734,424 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| Cost of license fees |
6,314 | 6,415 | 19,119 | 18,735 | ||||||||||||
| Cost of services |
47,886 | 46,635 | 143,796 | 141,107 | ||||||||||||
| Amortization of certain acquired intangible assets |
3,099 | 6,054 | 9,426 | 16,861 | ||||||||||||
| Total cost of revenues |
57,299 | 59,104 | 172,341 | 176,703 | ||||||||||||
| Gross profit |
207,100 | 192,978 | 616,981 | 557,721 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
96,868 | 94,946 | 297,167 | 281,379 | ||||||||||||
| Research and development |
37,007 | 34,294 | 108,423 | 103,847 | ||||||||||||
| General and administrative |
23,500 | 18,836 | 67,386 | 56,572 | ||||||||||||
| Facilities consolidation |
— | — | 8,165 | — | ||||||||||||
| Total operating expenses |
157,375 | 148,076 | 481,141 | 441,798 | ||||||||||||
| Income from operations |
49,725 | 44,902 | 135,840 | 115,923 | ||||||||||||
| Interest and other, net: |
||||||||||||||||
| Interest expense |
(8,053 | ) | (7,687 | ) | (22,663 | ) | (18,752 | ) | ||||||||
| Interest income |
5,506 | 5,431 | 15,647 | 17,818 | ||||||||||||
| Other, net |
688 | (1,196 | ) | (1,092 | ) | (1,547 | ) | |||||||||
| Total interest and other, net |
(1,859 | ) | (3,452 | ) | (8,108 | ) | (2,481 | ) | ||||||||
| Income before provision for income taxes |
47,866 | 41,450 | 127,732 | 113,442 | ||||||||||||
| Provision for income taxes |
14,360 | 12,435 | 38,320 | 34,033 | ||||||||||||
| Net income |
33,506 | 29,015 | 89,412 | 79,409 | ||||||||||||
| Other comprehensive income: |
||||||||||||||||
| Foreign currency translation adjustments |
443 | 1,282 | 29 | 4,308 | ||||||||||||
| Unrealized gain (loss) on available-for-sale investments, net of income taxes |
717 | (290 | ) | (1,720 | ) | (1,881 | ) | |||||||||
| Comprehensive income |
$ | 34,666 | $ | 30,007 | $ | 87,721 | $ | 81,836 | ||||||||
| Net income per share: |
||||||||||||||||
| Basic |
$ | 0.08 | $ | 0.07 | $ | 0.22 | $ | 0.20 | ||||||||
| Diluted |
$ | 0.08 | $ | 0.07 | $ | 0.21 | $ | 0.19 | ||||||||
| Number of shares used in per share calculations: |
||||||||||||||||
| Basic |
404,690 | 403,570 | 407,667 | 402,440 | ||||||||||||
| Diluted |
411,100 | 422,980 | 418,113 | 420,047 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| October 31, 2004 (unaudited) |
January 31, 2004 (audited*) |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 737,632 | $ | 683,729 | ||||
| Restricted cash |
1,633 | 1,583 | ||||||
| Short-term investments |
848,321 | 783,288 | ||||||
| Accounts receivable, net |
205,022 | 268,526 | ||||||
| Other current assets |
40,416 | 32,480 | ||||||
| Total current assets |
1,833,024 | 1,769,606 | ||||||
| Property and equipment, net |
349,581 | 358,497 | ||||||
| Goodwill, net |
56,100 | 56,100 | ||||||
| Acquired intangible assets, net |
6,570 | 15,997 | ||||||
| Long-term restricted cash |
4,130 | 3,880 | ||||||
| Other long-term assets |
13,176 | 16,109 | ||||||
| Total assets |
$ | 2,262,581 | $ | 2,220,189 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 20,284 | $ | 18,534 | ||||
| Accrued facilities consolidation charges |
13,489 | 9,847 | ||||||
| Accrued payroll and related liabilities |
60,076 | 61,155 | ||||||
| Accrued income taxes |
55,103 | 43,725 | ||||||
| Other accrued liabilities |
76,332 | 74,968 | ||||||
| Deferred revenues |
244,177 | 273,879 | ||||||
| Accrued liabilities related to land lease |
— | 19,656 | ||||||
| Deferred tax liabilities |
— | 600 | ||||||
| Current portion of notes payable |
128 | 493 | ||||||
| Total current liabilities |
469,589 | 502,857 | ||||||
| Deferred tax liabilities |
24 | 1,522 | ||||||
| Notes payable and other long-term obligations |
221,078 | 4,033 | ||||||
| Long-term debt related to land lease |
— | 191,639 | ||||||
| Convertible subordinated notes |
550,000 | 550,000 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock |
404 | 408 | ||||||
| Additional paid-in capital |
1,174,709 | 1,112,703 | ||||||
| Treasury stock, at cost |
(224,622 | ) | (123,303 | ) | ||||
| Retained earnings (deficit) |
70,411 | (19,001 | ) | |||||
| Deferred compensation |
(7,114 | ) | (10,462 | ) | ||||
| Accumulated other comprehensive income |
8,102 | 9,793 | ||||||
| Total stockholders’ equity |
1,021,890 | 970,138 | ||||||
| Total liabilities and stockholders’ equity |
$ | 2,262,581 | $ | 2,220,189 | ||||
| * Note: |
The condensed consolidated balance sheet at January 31, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
See accompanying notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Nine months ended October 31, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net income |
$ | 89,412 | $ | 79,409 | ||||