Attached files

file filename
8-K - LAWSON SOFTWARE, INC. 8-K - Lawson Software, Inc.a6241188.htm

Exhibit 99.1

Lawson Software Reports Third Quarter 2010 Financial Results

  • License fees revenue increased 28 percent
  • GAAP EPS of $0.01; non-GAAP EPS of $0.11
  • Healthvision acquisition completed during the quarter
  • Company expects Q4 2010 GAAP EPS of $0.04 - $0.06; Non-GAAP EPS of $0.10 - $0.12

ST. PAUL, Minn.--(BUSINESS WIRE)--April 7, 2010--Lawson Software, Inc. (Nasdaq: LWSN) today reported financial results for its third quarter of fiscal year 2010, which ended Feb. 28, 2010. Total revenues were $186.2 million with GAAP net income of $1.8 million, or diluted earnings per share (EPS) of $0.01. These results compare to third quarter of fiscal year 2009 revenues of $173.8 million with GAAP net income of $6.2 million, or EPS of $0.04. Revenue increased 7 percent; however it was offset by increased amortization expense due to the Healthvision acquisition and increased operating expenses primarily related to employee costs which resulted in a decline in GAAP net income from the prior year. Healthvision’s operations contributed $4.8 million in revenue and negatively impacted GAAP net income by $1.5 million or $0.01 per diluted share.

Non-GAAP net income for the third quarter increased 8 percent to $17.8 million, or $0.11 per diluted share, compared to $16.4 million, or $0.10 per diluted share in the third quarter of fiscal year 2009. Healthvision’s operations contributed $7.3 million in revenue, $1.4 million to non-GAAP net income, or $0.01 per diluted share. Third quarter non-GAAP net income and EPS includes $2.5 million of revenues impacted by purchase accounting adjustments and excludes $17.7 million of amortization expense, non-cash stock-based compensation, non-cash interest expense, integration expense and restructuring. Non-GAAP net income and EPS include a provision for income taxes based upon an estimated rate of 37 percent, which is applied consistently throughout the year.

“We are pleased with our third quarter results, which continue the positive trend in our business performance,” said Harry Debes, president and chief executive officer. “Driven by sales in our strategic growth markets, license revenues grew 28 percent or 25 percent excluding the impact of the Healthvision acquisition. Since closing the acquisition of Healthvision in January, integration efforts are well underway and initial results are meeting all of our expectations. In addition, we recently announced new Lawson Cloud Services offerings available on the Amazon Elastic Compute Cloud infrastructure. This is full-function ERP on Amazon that presents a compelling value proposition and lower-cost deployment option to our customers."

The company’s results were impacted by a decline in the value of the U.S. dollar relative to the value of foreign currencies as compared to the prior year period. The company estimates currency fluctuations had a negative $0.01 impact on both GAAP and non-GAAP EPS.

Implementation of Accounting Guidance on Convertible Debt Securities (formerly FSP APB 14-1)

Third quarter of fiscal 2010 GAAP net income includes $2.1 million of incremental non-cash interest expense resulting from the implementation of an accounting standard related to the company’s convertible notes. This non-cash interest expense is excluded from the company’s non-GAAP results. Results for fiscal 2009 have been adjusted to reflect the retroactive implementation of this accounting standard. Third quarter of fiscal 2009 GAAP net income includes $2 million of incremental non-cash interest expense.

Financial Guidance

For the fourth quarter of fiscal 2010, which ends May 31, 2010, the company estimates total revenues in the range of $194 million to $198 million. Non-GAAP total revenues are expected to be in the range of $196 million to $200 million, including approximately $2 million of revenues impacted by purchase accounting adjustments. The company anticipates GAAP EPS will be in the range of $0.04 to $0.06. Non-GAAP EPS is forecasted to be in the range of $0.10 to $0.12, excluding approximately $10 million of pre-tax adjustments for amortization expense, non-cash stock-based compensation expense, non-cash interest expense and a one-time gain related to the modification of a defined benefit pension plan. The non-GAAP effective tax rate for the fourth quarter is estimated at 37 percent. Guidance for the fourth fiscal quarter is based on foreign exchange rates as of the end of March.

Conference Call, Webcast and Key Metrics

The company will host a conference call and webcast to discuss its third quarter results and future outlook at 5 p.m. EDT (4 p.m. CDT) April 7, 2010. Interested parties may also listen to the call by dialing 1-888-282-9577 (or 1-517-308-9011) and using the passcode "LWSN." Interested parties should access the webcast at www.lawson.com/investor or dial into the conference call approximately 10-15 minutes before the scheduled start time.

A replay will be available approximately one hour after the webcast and conference call concludes and will remain available for one week. To access the replay, dial 1-800-216-4418 or 1-402-220-3864 for international callers. The webcast will also remain on www.lawson.com/investor for approximately one week. Additional key business metrics are also available at the Lawson Investor Relations web page.


About Lawson Software

Lawson Software provides software and service solutions to 4,500 customers in equipment service management and rental, fashion, food & beverage, healthcare, manufacturing & distribution, public sector (United States), service industries, and strategic human capital management across 40 countries. Lawson Software is a global provider of enterprise software, services and support to customers primarily in three sectors: services, trade and manufacturing/distribution. Lawson’s solutions include Enterprise Performance Management, Human Capital Management, Supply Chain Management, Enterprise Resource Planning, Customer Relationship Management, Manufacturing Resource Planning, Enterprise Asset Management and industry-tailored applications. Lawson solutions assist customers in simplifying their businesses or organizations by helping them streamline processes, reduce costs and enhance business or operational performance. Lawson is headquartered in St. Paul, Minn., and has offices around the world. Visit Lawson online at www.lawson.com. For Lawson’s listing on the Third North exchange in Sweden, Remium AB is acting as the Certified Adviser.

Forward-Looking Statements

This press release contains forward-looking statements that contain risks and uncertainties. These forward-looking statements contain statements of intent, belief or current expectations of Lawson Software and its management. Such forward-looking statements are not guarantees of future results and involve risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements. The company is not obligated to update forward-looking statements based on circumstances or events that occur in the future. Risks and uncertainties that may cause such differences include but are not limited to: uncertainties in uncertainties in the software industry; uncertainties as to when and whether the conditions for the recognition of deferred revenue will be satisfied; increased competition; general economic conditions; the impact of foreign currency exchange rate fluctuations; continuation of the global recession and credit crisis; Lawson’s ability to integrate the Healthvision acquisition successfully; global military conflicts; terrorist attacks; pandemics, and any future events in response to these developments; changes in conditions in the company's targeted industries and other risk factors listed in the company's most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K filed with the Securities and Exchange Commission. Lawson assumes no obligation to update any forward-looking information contained in this press release.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Lawson Software reports non-GAAP financial results including non-GAAP net income (loss) and non-GAAP net income (loss) per share. We believe that these non-GAAP measures provide meaningful insight into our operating performance and an alternative perspective of our results of operations. Our primary non-GAAP adjustments are described in detail below. We use these non-GAAP measures to assess our operating performance, to develop budgets, to serve as a measurement for incentive compensation awards and to manage expenditures. Presentation of these non-GAAP measures allows investors to review our results of operations from the same perspective as management and our Board of Directors. Lawson has historically reported similar non-GAAP financial measures to provide investors an enhanced understanding of our operations, facilitate investors’ analysis and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. We also believe that the non-GAAP measures are useful to investors because they provide supplemental information that research analysts frequently use to analyze software companies including those that have recently made significant acquisitions.

The method we use to produce non-GAAP results is not in accordance with GAAP and may differ from the methods used by other companies. These non-GAAP results should not be regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both our financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP results provided for each period presented, which are attached to this release.

Our primary non-GAAP reconciling items are as follows:

Purchase accounting impact on revenue - Lawson's non-GAAP financial results include pro forma adjustments for deferred maintenance and consulting revenues that we would have recognized under GAAP but for the related purchase accounting. The deferred revenue for maintenance and consulting on the acquired entity’s balance sheet, at the time of the acquisition, was eliminated from GAAP results as part of the purchase accounting for the acquisition. As a result, our GAAP results do not, in management’s view, reflect all of our maintenance and consulting activity. We believe the inclusion of the pro forma revenue adjustment provides investors a helpful alternative view of Lawson’s maintenance and consulting operations.

Amortization of purchased maintenance contracts – We have excluded amortization of purchased maintenance contracts from our non-GAAP results. The purchase price related to these contracts is being amortized based upon the proportion of future cash flows estimated to be generated each period over the estimated useful lives of the contracts. We believe that the exclusion of the amortization expense related to the purchased maintenance contracts provides investors an enhanced understanding of our results of operations.

Stock-based compensation - Expense related to stock-based compensation has been excluded from our non-GAAP results of operations. These charges consist of the estimated fair value of share-based awards including stock option, restricted stock, restricted stock units and share purchases under our employee stock purchase plan. While the charges for stock-based compensation are of a recurring nature, as we grant stock-based awards to attract and retain quality employees and as an incentive to help achieve financial and other corporate goals, we exclude them from our results of operation in assessing our operating performance. These charges are typically non-cash and are often the result of complex calculations using an option pricing model that estimates stock-based awards’ fair value based on factors such as volatility and risk-free interest rates that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in our operating plans. In addition, we believe the exclusion of these charges facilitates comparisons of our operating results with those of our competitors who may have different policies regarding the use of stock-based awards.

Transaction and integration expenses – We have incurred various transaction and integration related expenses as part of our acquisitions. These transaction costs and costs of integrating the operations of acquired businesses and Lawson are incremental to our historical costs and were charged to GAAP results of operations in the periods incurred. We do not consider these costs in our assessment of our operating performance. While these costs are not recurring with respect to our past acquisitions, we may incur similar costs in the future if we pursue other acquisitions. We believe that the exclusion of the non-recurring acquisition related transaction and integration costs provide investors an appropriate alternative view of our results of operations and facilitates comparisons of our results period-over-period.

Pre-merger claims reserve adjustment – We have excluded the adjustment to our pre-merger claims reserve from our non-GAAP results. As part of the purchase accounting relating to the Intentia transaction, we established a reserve for Intentia customer claims and disputes that arose before the acquisition which were originally recorded to goodwill. As we are outside the period in which adjustments to such purchase accounting is allowed, adjustments to the reserve are recorded in our general and administrative expenses under GAAP. We do not consider the adjustments to this reserve established under purchase accounting in our assessment of our operating performance. Further, since the original reserve was established in purchase accounting, the original charge was not reflected in our operating statement. We believe that the exclusion of the pre-merger claims reserve adjustment provides investors an appropriate alternative view of our results of operations and facilitates comparisons of our results period-over-period.


Restructuring - We have recorded various restructuring charges related to actions taken to reduce our cost structure to enhance operating effectiveness and improve profitability and to eliminate certain redundancies in connection with acquisitions. These restructuring activities impacted different functional areas of our operations in different locations and were undertaken to meet specific business objectives in light of the facts and circumstances at the time of each restructuring event. These charges include costs related to severance and other termination benefits as well as costs to exit leased facilities. These restructuring charges are excluded from management’s assessment of our operating performance. We believe that the exclusion of the non-recurring restructuring charges provide investors an enhanced view of the cost structure of our operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.

Amortization – We have excluded amortization of acquisition-related intangible assets including purchased technology, client lists, customer relationships, trademarks, order backlog and non-compete agreements from our non-GAAP results. The fair value of the intangible assets, which was allocated to these assets through purchase accounting, is amortized using accelerated or straight-line methods which approximate the proportion of future cash flows estimated to be generated each period over the estimated useful lives of the applicable assets. While these non-cash amortization charges are recurring in nature and the underlying assets benefit our operations, this amortization expense can fluctuate significantly based on the nature, timing and size of our past acquisitions and may be affected by any future acquisitions. This makes comparisons of our current and historic operating performance difficult. Therefore, we exclude such accounting expenses when analyzing the results of all our operations including those of acquired entities. We believe that the exclusion of the amortization expense of acquisition-related intangible assets provides investors useful information facilitating comparison of our results period-over-period and with other companies in the software industry as they each have their own acquisition histories and related adjustments.

Incremental non-cash interest related to convertible debt - We have excluded the incremental non-cash interest expense related to our $240.0 million in 2.5% senior convertible notes that we are required to recognize under accounting guidance for convertible debt securities from our non-GAAP results of operations for all periods presented, including a retrospective restatement of GAAP results upon our adoption of accounting guidance for convertible debt securities on June 1, 2009. This accounting guidance requires us to recognize significant additional non-cash interest expense based on the market rate for similar debt instruments that do not contain a comparable conversion feature. We have allocated a portion of the proceeds from the issuance of the senior notes to the embedded conversion feature resulting in a discount on our senior notes. The debt discount is being amortized as additional non-cash interest expense over the term of the notes using the effective interest method. These non-cash interest charges are not included in our operating plans and are not included in management’s assessment of our operating performance. We believe that the exclusion of the non-cash interest charges provides a useful alternative for investors to evaluate the cost structure of our operations in a manner consistent with our internal evaluation of our cost structure.


 
LAWSON SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in USD thousands, except per share data)
(unaudited)
  Three Months Ended  

% Increase
(Decrease)
as reported

 

% Increase
(Decrease)

at constant currency

Feb. 28, 2010  

 Feb. 28, 2009 (1)
(as adjusted)

   
Revenues:  
License fees $ 31,873 $ 24,881 28 % 23 %
Maintenance   89,080       85,806   4 % 2 %
Software revenues 120,953 110,687 9 % 7 %
Consulting   65,267       63,161   3 % (3 %)
Total revenues   186,220       173,848   7 % 3 %
 
Cost of revenues:
Cost of license fees 6,595 4,872 35 % 26 %
Cost of maintenance   17,352       14,810   17 % 11 %
Cost of software revenues 23,947 19,682 22 % 15 %
Cost of consulting   59,249       62,871   (6 %) (12 %)
Total cost of revenues   83,196       82,553   1 % (6 %)
Gross profit   103,024       91,295   13 % 11 %
 
Operating expenses:
Research and development 22,760 18,209 25 % 19 %
Sales and marketing 42,919 34,203 25 % 19 %
General and administrative 21,224 18,542 14 % 11 %
Restructuring 1,154 3,534 (67 %) (69 %)
Amortization of acquired intangibles   2,699       1,890   43 % 32 %
Total operating expenses   90,756       76,378   19 % 13 %
Operating income   12,268       14,917   (18 %) (2 %)
 
Other income (expense), net:
Interest income 128 801 (84 %) (85 %)
Interest expense (4,514 ) (3,852 ) 17 % 16 %
Other income (expense), net   165       318   NA NA
Total other income (expense), net   (4,221 )     (2,733 ) NA NA
 
Income before income taxes 8,047 12,184 (34 %) (20 %)
Provision for income taxes   6,224       5,967   4 % 3 %
Net income $ 1,823     $ 6,217   (71 %) (55 %)
Net income per share:
Basic $ 0.01     $ 0.04  
Diluted $ 0.01     $ 0.04  
 
Weighted average common shares outstanding:
Basic 161,412 162,675 (1 %)
Diluted     165,367       164,648     0 %    
 

We disclose the percent change in the results from one period to another using constant currency to adjust year-over-year measurements for impacts due to currency fluctuations. Constant currency changes should be considered in addition to, and not as a substitute for changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with US GAAP. We calculate constant currency changes by converting entities’ financial results for the prior year period that are reported in currencies other than the United States dollar at the exchange rate in effect for the current period rather than the previous period.

(1) Adjusted to reflect adoption of accounting guidance for convertible debt securities.


 
LAWSON SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in USD thousands, except per share data)
(unaudited)
  Nine Months Ended  

% Increase
(Decrease)
as reported

 

% Increase
(Decrease)
at constant currency

Feb.28, 2010  

  Feb. 28, 2009 (1)
(as adjusted)

   
Revenues:  
License fees $ 86,179 $ 76,067 13 % 11 %
Maintenance   259,662       264,998   (2 %) 0 %
Software revenues 345,841 341,065 1 % 2 %
Consulting   193,793       230,056   (16 %) (17 %)
Total revenues   539,634       571,121   (6 %) (5 %)
 
Cost of revenues:
Cost of license fees 16,929 16,852 0 % (4 %)
Cost of maintenance   49,833       49,057   2 % 1 %
Cost of software revenues 66,762 65,909 1 % 0 %
Cost of consulting   171,027       209,028   (18 %) (19 %)
Total cost of revenues   237,789       274,937   (14 %) (14 %)
Gross profit   301,845       296,184   2 % 3 %
 
Operating expenses:
Research and development 65,651 62,669 5 % 5 %
Sales and marketing 118,796 123,680 (4 %) (4 %)
General and administrative 60,071 59,996 0 % 1 %
Restructuring 5,905 11,020 (46 %) (52 %)
Amortization of acquired intangibles   6,524       6,875   (5 %) (6 %)
Total operating expenses   256,947       264,240   (3 %) (3 %)
Operating income   44,898       31,944   41 % 60 %
 
Other income (expense), net:
Interest income 691 5,836 (88 %) (88 %)
Interest expense (13,558 ) (11,752 ) 15 % 15 %
Other income (expense), net   5       591   NA NA
Total other income (expense), net   (12,862 )     (5,325 ) NA NA
 
Income before income taxes 32,036 26,619 20 % 36 %
Provision for income taxes   21,482       21,066   2 % 2 %
Net income $ 10,554     $ 5,553   90 % 316 %
Net income per share:      
Basic $ 0.07     $ 0.03  
Diluted $ 0.06     $ 0.03  
Weighted average common shares outstanding:
Basic 161,308 164,508 (2 %)
Diluted     164,901       166,958     (1 %)    
 

We disclose the percent change in the results from one period to another using constant currency to adjust year-over-year measurements for impacts due to currency fluctuations. Constant currency changes should be considered in addition to, and not as a substitute for changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with US GAAP. We calculate constant currency changes by converting entities’ financial results for the prior year period that are reported in currencies other than the United States dollar at the exchange rate in effect for the current period rather than the previous period.

(1) Adjusted to reflect adoption of accounting guidance for convertible debt securities.


 
LAWSON SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(in USD thousands)
(unaudited)
  Feb. 28, 2010  

May 31, 2009 (1)

    (as adjusted)

ASSETS

 
Current assets:
Cash and cash equivalents $ 226,346 $ 414,815
Restricted cash – current 1,043 9,208
Trade accounts receivable, net 132,905 152,666
Income taxes receivable 198 4,242
Deferred income taxes – current 23,776 18,909
Prepaid expenses and other current assets   38,806       52,255  
Total current assets 423,074 652,095
 
Restricted cash - non-current 10,011 1,786
Property and equipment, net 56,355 55,641
Goodwill 558,130 470,274
Other intangibles assets, net 169,098 91,701
Deferred income taxes - non-current 44,922 39,835
Other assets   13,947       13,149  
 
Total assets $ 1,275,537     $ 1,324,481  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 
Current liabilities:
Long-term debt – current $ 2,537 $ 4,591
Accounts payable 2,163 14,018
Accrued compensation and benefits 69,146 73,976
Income taxes payable 3,013 4,512
Deferred income taxes – current 14,381 5,652
Deferred revenue – current 199,024 279,041
Other current liabilities   45,692       56,308  
Total current liabilities 335,956 438,098
 
Long-term debt – non-current 222,333 217,333
Deferred income taxes - non-current 43,700 16,827
Deferred revenue – non-current 9,436 13,482
Other long-term liabilities   15,268       14,781  
 
Total liabilities   626,693       700,521  
 
Stockholders’ equity:
Common stock 2,024 2,018
Additional paid-in capital 882,531 870,722
Treasury stock, at cost (327,684 ) (324,651 )
Retained earnings 51,272 40,718
Accumulated other comprehensive income   40,701       35,153  
Total stockholders’ equity   648,844       623,960  
Total liabilities and stockholders’ equity $ 1,275,537     $ 1,324,481  

(1) Adjusted to reflect adoption of accounting guidance for convertible debt securities.

 

 
LAWSON SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in USD thousands)
(unaudited)
  Three Months Ended   Nine Months Ended

Feb. 28, 2010

 

 Feb. 28, 2009(1)

Feb. 28, 2010  

 Feb. 28, 2009(1)

   

 

  (as adjusted)       (as adjusted)
Cash flows from operating activities:
Net income (loss) $ 1,823 $ 6,217 $ 10,554 $ 5,553

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization 12,553 9,499 33,331 29,269
Amortization of debt issuance costs 260 255 780 766
Amortization of debt discount 2,122 1,987 6,365 5,961
Deferred income taxes 994 1,479 5,885 3,617
Provision for doubtful accounts 366 1,010 833 1,078
Warranty provision 1,191 1,524 3,544 4,704
Net (loss) gain on disposal of assets (3 ) - 7 -
Excess tax benefits from stock transactions (191 ) (81 ) (494 ) (448 )
Stock-based compensation expense 6,258 2,027 13,258 6,761
Amortization of discounts and premiums on marketable securities - (9 ) - 6
Changes in operating assets and liabilities:
Trade accounts receivable (38 ) (7,111 ) 34,329 31,796
Prepaid expenses and other assets 15,255 (5,376 ) 16,982 (2,283 )
Accounts payable (5,402 ) 562 (13,748 ) (10,893 )
Accrued expenses and other liabilities 2,221 182 (27,741 ) (7,898 )
Income taxes payable/receivable (1,209 ) 2,326 3,647 (2,800 )
Deferred revenue   7,514       1,366       (95,963 )     (107,213 )
Net cash provided by (used in) operating activities   43,714       15,857       (8,431 )     (42,024 )
 
Cash flows from investing activities:
Cash paid in conjunction with acquisitions, net of cash acquired (160,000 ) - (160,000 ) -
Change in restricted cash (785 ) 730 27 (8,677 )

Proceeds from maturities and sales of marketable securities and
investments

4 (13 ) 4 50,664
Purchases of property and equipment   (5,368 )     (4,461 )     (13,949 )     (20,530 )
Net cash (used in) provided by investing activities   (166,149 )     (3,744 )     (173,918 )     21,457  
 
Cash flows from financing activities:
Principal payments on long-term debt (340 ) (313 ) (1,231 ) (1,223 )
Payments on capital lease obligations (739 ) (270 ) (2,044 ) (887 )
Cash proceeds from exercise of stock options 544 410 2,021 1,957
Excess tax benefit from stock transactions 191 81 494 448
Cash proceeds from employee stock purchase plan 573 629 1,697 2,157
Repurchase of common stock   (6,139 )     -       (7,423 )     (90,966 )
Net cash (used in) provided by financing activities   (5,910 )     537       (6,486 )     (88,514 )
Effect of exchange rate changes on cash and cash equivalents   (5,772 )     (4,940 )     366       (17,802 )
 
Net (decrease) increase in cash and cash equivalents (134,117 ) 7,710 (188,469 ) (126,883 )
Cash and cash equivalents at beginning of period   360,463       300,528       414,815       435,121  
Cash and cash equivalents at end of period $ 226,346     $ 308,238     $ 226,346     $ 308,238  
(1) Adjusted to reflect adoption of accounting guidance for convertible debt securities.
 

 

LAWSON SOFTWARE, INC.

RECONCILIATION OF CONSOLIDATED GAAP NET INCOME TO CONSOLIDATED NON-GAAP NET INCOME
(in USD thousands)
  Three Months Ended   Nine Months Ended
Feb. 28, 2010  

 Feb. 28, 2009(1)

Feb. 28, 2010  

 Feb.28, 2009(1)

    (as adjusted)       (as adjusted)
Net income, as reported $ 1,823 $ 6,217 $ 10,554 $ 5,553
Purchase accounting impact on revenue (2 ) 2,479 58 2,479 474
Purchase accounting impact on consulting costs - 39 -

105

Amortization of purchased maintenance contracts 473 631 1,570 2,015
Stock-based compensation 6,258 2,026 13,255 6,761
Pre-merger claims reserve adjustment - (79 ) (661 ) (3,887 )
Integration expenses 1,153 - 1,153 -
Restructuring 1,154 3,534 5,905 11,020
Amortization of intangible assets 6,582 4,918 15,409 15,228
Amortization of debt discount 2,122 1,987 6,365 5,961
Tax provision (5 )   (4,235 )     (2,887 )     (7,197 )     (1,438 )
Non-GAAP net income     $ 17,809     $ 16,444     $ 48,832     $ 41,792  
.                  
RECONCILIATION OF CONSOLIDATED GAAP TO CONSOLIDATED NON-GAAP PER SHARE EFFECT
Three Months Ended Nine Months Ended
Feb. 28, 2010

 Feb. 28, 2009(1)

Feb. 28, 2010

 Feb.28, 2009(1)

    (as adjusted)       (as adjusted)
Net income, as reported (3 ) $ 0.01 $ 0.04 $ 0.06 $ 0.03
Purchase accounting impact on revenue (2 ) 0.01 0.00 0.02 0.00
Purchase accounting impact on consulting costs - 0.00 - 0.00
Amortization of purchased maintenance contracts 0.00 0.00 0.01 0.01
Stock-based compensation 0.04 0.01 0.08 0.04
Pre-merger claims reserve adjustment - (0.00 ) (0.00 ) (0.02 )
Restructuring 0.01 - 0.01 -
Integration expenses 0.01 0.02 0.04 0.07
Amortization of intangible assets 0.04 0.03 0.09 0.09
Amortization of debt discount 0.01 0.01 0.04 0.04
Tax provision (5 )   (0.03 )     (0.02 )     (0.04 )     (0.01 )
Non-GAAP net income per share (3 ) (4) $ 0.11     $ 0.10     $ 0.30     $ 0.25  
Weighted average shares – basic 161,412 162,675 161,308 164,508
Weighted average shares – diluted       165,367       164,648       164,901       168,114  
                   
SUMMARY OF NON-GAAP ITEMS (in USD thousands)
Three Months Ended Nine Months Ended
Feb. 28, 2010

 Feb. 28, 2009(1)

Feb. 28, 2010

 Feb. 28, 2009(1)

    (as adjusted)      

(as adjusted)

Purchase accounting impact on revenue (2 ) $ 2,479 $ 58 $ 2,479 $ 474
Purchase accounting impact on consulting costs - 39 - 105
Amortization of purchased maintenance contracts 473 631 1,570 2,015
Stock-based compensation 6,258 2,026 13,255 6,761
Pre-merger claims reserve adjustment - (79 ) (661 ) (3,887 )
Integration expenses 1,153 - 1,153 -
Restructuring 1,154 3,534 5,905 11,020
Amortization of intangible assets 6,582 4,918 15,409 15,228
Amortization of debt discount   2,122       1,987       6,365       5,961  
subtotal pre-tax adjustments   20,221       13,114       45,475       37,677  
Tax provision (5 )   (4,235 )     (2,887 )     (7,197 )     (1,438 )
Impact on net income     $ 15,986     $ 10,227     $ 38,278     $ 36,239  

(1) Adjusted to reflect adoption of accounting guidance for convertible debt securities.

(2) The purchase accounting impact on revenues for the three months ended February 28, 2010 and February 28, 2009, $2,479,000 and $58,000, and for the nine months ended February 28, 2010 and February 28, 2009 $2,479,000 and $474,000 respectively.

(3) For calculation of EPS, basic weighted average shares are used with a net loss and diluted weighted average shares are used with net income.

(4) Net income per share columns may not total due to rounding.

(5) The non-GAAP provision is calculated excluding the non-GAAP adjustments on a jurisdictional basis.


 

LAWSON SOFTWARE, INC.

SUPPLEMENTAL NON-GAAP MEASURES
INCREASE (DECREASE) IN GAAP AMOUNTS REPORTED
(in USD thousands)
(unaudited)
  Three Months Ended   Nine Months Ended
Feb.28, 2010  

 Feb. 28, 2009(1)

Feb. 28, 2010  

 Feb. 28, 2009(1)

    (as adjusted)       (as adjusted)
Revenue items
Purchase accounting impact on maintenance 1,969 - 1,969 -
Purchase accounting impact on services $ 510     $ 58     $ 510     $ 474  
Total revenue items 2,479 58 2,479 474
 
Cost of license items
Amortization of acquired software   (3,883 )     (3,028 )     (8,885 )     (8,354 )
Total cost of license items (3,883 ) (3,028 ) (8,885 ) (8,354 )
 
Cost of maintenance items
Amortization of purchased maintenance contracts (473 ) (631 ) (1,570 ) (2,015 )
Stock-based compensation   (327 )     (80 )     (861 )     (197 )
Total cost of maintenance items (800 ) (711 ) (2,431 ) (2,212 )
 
Cost of consulting items
Purchased accounting impact on consulting costs - (39 ) - (105 )
Amortization of intangible assets - - - 1
Stock-based compensation   (1,649 )     (290 )     (2,914 )     (465 )
Total cost of consulting items (1,649 ) (329 ) (2,914 ) (569 )
 
Research and development items
Stock-based compensation   (448 )     (162 )     (628 )     (460 )
Total research and development items (448 ) (162 ) (628 ) (460 )
 
Sales and marketing items
Stock-based compensation   (2,947 )     (453 )     (5,797 )     (1,453 )
Total sales and marketing items (2,947 ) (453 ) (5,797 ) (1,453 )
 
General and administrative items
Integration expenses (1,153 ) - (1,153 ) -
Pre-merger claims reserve adjustment - 79 661 3,887
Stock-based compensation   (887 )     (1,041 )     (3,055 )     (4,186 )
Total general and administrative items (2,040 ) (962 ) (3,547 ) (299 )
 
Restructuring (1,154 ) (3,534 ) (5,905 ) (11,020 )
 
Amortization of acquired intangibles (2,699 ) (1,890 ) (6,524 ) (6,875 )
 
Amortization of debt discount (2,122 ) (1,987 ) (6,365 ) (5,961 )
 

Tax provision

(2)

  4,235       2,887       7,197       1,438  
 
Total adjustments $ 15,986     $ 10,227     $ 38,278     $ 36,239  
 

(1) Adjusted to reflect adoption of accounting guidance for convertible debt securities.

(2) At the beginning of the fiscal year, the company computed an estimated annual global effective non-GAAP tax rate of 37%. The non-GAAP tax rate is calculated excluding non-GAAP adjustments on a jurisdictional basis. This estimated 37% tax rate will be utilized each quarter throughout fiscal year 2010.

CONTACT:
Lawson Software
Joe Thornton
Media
+1-651-767-6154
joe.thornton@us.lawson.com
or
Barbara Doyle
Investors and Analysts
+1-651-767-4385
investor@lawson.com