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 March 31, 2005
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 April 30, 2005 | |
| Common Stock, par value $0.001 | 24,859,239 |
PHOENIX TECHNOLOGIES LTD.
FORM 10-Q
| Page | ||||
| PART I. |
FINANCIAL INFORMATION |
|||
| Item 1. |
Financial Statements | |||
| Condensed Consolidated Balance Sheets as of March 31, 2005 and September 30, 2004 | 3 | |||
| Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2005 and 2004 | 4 | |||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2005 and 2004 | 5 | |||
| Notes to Condensed Consolidated Financial Statements | 6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 | ||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 29 | ||
| Item 4. |
Controls and Procedures | 30 | ||
| PART II. |
OTHER INFORMATION |
|||
| Item 1. |
Legal Proceedings | 32 | ||
| Item 4. |
Submission of Matters to A Vote of Security Holders | 33 | ||
| Item 6. |
Exhibits | 34 | ||
| Signature | 35 | |||
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)
| March 31, 2005 |
September 30, 2004 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 45,422 | $ | 38,898 | ||||
| Short-term investments and available for sale securities |
13,498 | 20,925 | ||||||
| Accounts receivable, net of allowances of $976 and $1,569 at March 31, 2005 and September 30, 2004, respectively |
35,776 | 23,871 | ||||||
| Prepaid royalties and maintenance |
2,223 | 2,266 | ||||||
| Deferred income taxes |
— | 370 | ||||||
| Other current assets |
1,574 | 3,632 | ||||||
| Total current assets |
98,493 | 89,962 | ||||||
| Property and equipment, net |
4,287 | 4,519 | ||||||
| Computer software costs, net |
6,245 | 7,922 | ||||||
| Goodwill |
13,933 | 13,433 | ||||||
| Intangible assets, net |
403 | 437 | ||||||
| Prepaid royalties - non current |
1,115 | 2,221 | ||||||
| Other assets |
2,127 | 2,391 | ||||||
| Total assets |
$ | 126,603 | $ | 120,885 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,168 | $ | 2,188 | ||||
| Accrued compensation and related liabilities |
6,810 | 5,535 | ||||||
| Deferred revenue |
6,040 | 9,642 | ||||||
| Income taxes payable |
3,032 | 3,136 | ||||||
| Accrued restructuring charges - current |
325 | 536 | ||||||
| Other accrued liabilities |
4,174 | 3,229 | ||||||
| Total current liabilities |
21,549 | 24,266 | ||||||
| Accrued restructuring charges - noncurrent |
1,507 | 1,648 | ||||||
| Other liabilities |
2,040 | 1,942 | ||||||
| Total liabilities |
25,096 | 27,856 | ||||||
| Commitments and Contingencies (Note 7) |
||||||||
| 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, 32,054 and 31,734 shares issued, 24,858 and 24,536 shares outstanding at March 31, 2005 and September 30, 2004, respectively |
32 | 32 | ||||||
| Additional paid-in capital |
183,122 | 181,302 | ||||||
| Deferred compensation |
(538 | ) | (777 | ) | ||||
| Retained earnings |
10,025 | 4,793 | ||||||
| Accumulated other comprehensive loss |
(691 | ) | (1,878 | ) | ||||
| Less: Cost of treasury stock (7,196 shares at March 31, 2005 and September 30, 2004) |
(90,443 | ) | (90,443 | ) | ||||
| Total stockholders’ equity |
101,507 | 93,029 | ||||||
| Total liabilities and stockholders’ equity |
$ | 126,603 | $ | 120,885 | ||||
See notes to unaudited condensed consolidated financial statements
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Revenues |
$ | 27,044 | $ | 20,672 | $ | 53,220 | $ | 39,172 | ||||||||
| Cost of revenues |
4,328 | 4,042 | 8,564 | 7,656 | ||||||||||||
| Gross Margin |
22,716 | 16,630 | 44,656 | 31,516 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
5,215 | 5,469 | 9,945 | 11,008 | ||||||||||||
| Sales and marketing |
8,689 | 7,404 | 17,999 | 15,748 | ||||||||||||
| General and administrative |
4,052 | 3,143 | 7,629 | 6,226 | ||||||||||||
| Amortization of acquired intangible assets |
17 | 17 | 35 | 34 | ||||||||||||
| Stock-based compensation |
60 | 53 | 132 | 105 | ||||||||||||
| Restructuring and related charges |
— | (60 | ) | — | (60 | ) | ||||||||||
| Total operating expenses |
18,033 | 16,026 | 35,740 | 33,061 | ||||||||||||
| Income (loss) from operations |
4,683 | 604 | 8,916 | (1,545 | ) | |||||||||||
| Interest and other income, net |
(44 | ) | (528 | ) | (741 | ) | (367 | ) | ||||||||
| Income (loss) before income taxes |
4,639 | 76 | 8,175 | (1,912 | ) | |||||||||||
| Income tax expense |
1,649 | 683 | 2,943 | 1,133 | ||||||||||||
| Net income (loss) |
$ | 2,990 | $ | (607 | ) | $ | 5,232 | $ | (3,045 | ) | ||||||
| Earnings (loss) per share: |
||||||||||||||||
| Basic |
$ | 0.12 | $ | (0.02 | ) | $ | 0.21 | $ | (0.12 | ) | ||||||
| Diluted |
$ | 0.12 | $ | (0.02 | ) | $ | 0.20 | $ | (0.12 | ) | ||||||
| Shares used in Earnings (loss) per share calculation: |
||||||||||||||||
| Basic |
24,786 | 24,435 | 24,691 | 24,384 | ||||||||||||
| Diluted |
25,873 | 24,435 | 25,546 | 24,384 | ||||||||||||
See notes to unaudited condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Six Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 5,232 | $ | (3,045 | ) | |||
| Reconciliation to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
3,336 | 3,882 | ||||||
| Stock-based compensation |
133 | 105 | ||||||
| Loss from disposal of fixed assets |
— | 268 | ||||||
| Deferred income tax |
370 | (9 | ) | |||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
(11,905 | ) | (4,750 | ) | ||||
| Prepaid royalties and maintenance |
1,149 | 1,361 | ||||||
| Other assets |
2,322 | 123 | ||||||
| Accounts payable |
(1,021 | ) | (663 | ) | ||||
| Accrued compensation and related liabilities |
1,275 | (2,052 | ) | |||||
| Deferred revenue |
(3,602 | ) | 15,483 | |||||
| Income taxes |
(104 | ) | (1,033 | ) | ||||
| Accrued restructuring charges |
(485 | ) | (613 | ) | ||||
| Other accrued liabilities |
1,177 | (690 | ) | |||||
| Net cash (used in) provided by operating activities |
(2,123 | ) | 8,367 | |||||
| Cash flows from investing activities: |
||||||||
| Proceeds from sales and maturities of investments |
85,737 | 86,939 | ||||||
| Purchases of investments |
(78,310 | ) | (83,945 | ) | ||||
| Proceeds from the sale of fixed assets |
— | 38 | ||||||
| Purchases of property and equipment |
(1,394 | ) | (593 | ) | ||||
| Acquisition of businesses, net of cash acquired |
(500 | ) | — | |||||
| Net cash provided by investing activities |
5,533 | 2,439 | ||||||
| Cash flows from financing activities: |
||||||||
| Proceeds from stock purchases under stock option and stock purchase plans |
1,927 | 641 | ||||||
| Net cash provided by financing activities |
1,927 | 641 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
1,187 | 144 | ||||||
| Net increase in cash and cash equivalents |
6,524 | 11,591 | ||||||
| Cash and cash equivalents at beginning of period |
38,898 | 26,601 | ||||||
| Cash and cash equivalents at end of period |
$ | 45,422 | $ | 38,192 | ||||
See notes to unaudited condensed consolidated financial statements
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Summary of Significant Accounting Policies