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EX-31.1 - EXHIBIT 31.1 - BMC SOFTWARE INC | c26121exv31w1.htm |
EX-32.1 - EXHIBIT 32.1 - BMC SOFTWARE INC | c26121exv32w1.htm |
EX-32.2 - EXHIBIT 32.2 - BMC SOFTWARE INC | c26121exv32w2.htm |
EX-31.2 - EXHIBIT 31.2 - BMC SOFTWARE INC | c26121exv31w2.htm |
EX-10.32 - EXHIBIT 10.32 - BMC SOFTWARE INC | c26121exv10w32.htm |
EX-10.34 - EXHIBIT 10.34 - BMC SOFTWARE INC | c26121exv10w34.htm |
EXCEL - IDEA: XBRL DOCUMENT - BMC SOFTWARE INC | Financial_Report.xls |
EX-10.33 - EXHIBIT 10.33 - BMC SOFTWARE INC | c26121exv10w33.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2011
OR
o | 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: 001-16393
BMC Software, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 74-2126120 | |
(State or other jurisdiction of | (IRS Employer | |
incorporation or organization) | Identification No.) | |
2101 CityWest Boulevard | ||
Houston, Texas | 77042-2827 | |
(Address of principal executive offices) | (Zip Code) |
(713) 918-8800
(Registrants telephone number, including area code)
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of January 27, 2012, there were 164,227,000 outstanding shares of Common Stock, par value
$.01, of the registrant.
BMC SOFTWARE, INC.
QUARTER ENDED DECEMBER 31, 2011
QUARTER ENDED DECEMBER 31, 2011
INDEX
2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
BMC SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value data)
December 31, | March 31, | |||||||
2011 | 2011 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,319.5 | $ | 1,660.9 | ||||
Short-term investments |
37.1 | 27.8 | ||||||
Trade accounts receivable, net |
239.4 | 284.1 | ||||||
Trade finance receivables, net |
74.2 | 112.6 | ||||||
Deferred tax assets |
58.5 | 65.1 | ||||||
Other current assets |
107.1 | 116.9 | ||||||
Total current assets |
1,835.8 | 2,267.4 | ||||||
Property and equipment, net |
84.4 | 94.2 | ||||||
Software development costs, net |
230.2 | 193.8 | ||||||
Long-term investments |
57.4 | 67.8 | ||||||
Long-term trade finance receivables, net |
55.7 | 110.8 | ||||||
Intangible assets, net |
93.4 | 100.9 | ||||||
Goodwill |
1,512.8 | 1,407.0 | ||||||
Other long-term assets |
218.5 | 243.5 | ||||||
Total assets |
$ | 4,088.2 | $ | 4,485.4 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 31.8 | $ | 30.8 | ||||
Finance payables |
2.2 | 16.6 | ||||||
Accrued liabilities |
248.5 | 316.0 | ||||||
Deferred revenue |
1,001.9 | 1,026.9 | ||||||
Total current liabilities |
1,284.4 | 1,390.3 | ||||||
Long-term deferred revenue |
868.5 | 928.6 | ||||||
Long-term borrowings |
325.4 | 335.6 | ||||||
Other long-term liabilities |
144.6 | 168.0 | ||||||
Total liabilities |
2,622.9 | 2,822.5 | ||||||
Commitments and contingencies (Note 8) |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $.01 par value, 1.0 shares authorized, none issued and
outstanding |
| | ||||||
Common stock, $.01 par value, 600.0 shares authorized, 249.1 shares issued |
2.5 | 2.5 | ||||||
Additional paid-in capital |
1,149.6 | 1,077.4 | ||||||
Retained earnings |
3,174.8 | 2,845.2 | ||||||
Accumulated other comprehensive income |
15.5 | 32.0 | ||||||
4,342.4 | 3,957.1 | |||||||
Treasury stock, at cost (84.1 and 71.9 shares) |
(2,877.1 | ) | (2,294.2 | ) | ||||
Total stockholders equity |
1,465.3 | 1,662.9 | ||||||
Total liabilities and stockholders equity |
$ | 4,088.2 | $ | 4,485.4 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
BMC SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
(Unaudited)
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
License |
$ | 225.0 | $ | 234.6 | $ | 644.2 | $ | 613.9 | ||||||||
Maintenance |
272.3 | 259.3 | 807.4 | 765.6 | ||||||||||||
Professional services |
50.9 | 46.0 | 155.7 | 123.6 | ||||||||||||
Total revenue |
548.2 | 539.9 | 1,607.3 | 1,503.1 | ||||||||||||
Operating expenses: |
||||||||||||||||
Cost of license revenue |
38.6 | 32.5 | 116.2 | 95.2 | ||||||||||||
Cost of maintenance revenue |
46.2 | 43.7 | 139.5 | 124.3 | ||||||||||||
Cost of professional services revenue |
52.8 | 54.7 | 153.4 | 132.0 | ||||||||||||
Selling and marketing expenses |
154.1 | 160.2 | 452.3 | 445.5 | ||||||||||||
Research and development expenses |
38.5 | 45.0 | 121.5 | 126.9 | ||||||||||||
General and administrative expenses |
50.4 | 56.0 | 160.0 | 163.0 | ||||||||||||
Amortization of intangible assets |
5.8 | 8.4 | 26.5 | 25.2 | ||||||||||||
Total operating expenses |
386.4 | 400.5 | 1,169.4 | 1,112.1 | ||||||||||||
Operating income |
161.8 | 139.4 | 437.9 | 391.0 | ||||||||||||
Other income (loss), net: |
||||||||||||||||
Interest and other income, net |
2.3 | 4.5 | 8.7 | 8.9 | ||||||||||||
Interest expense |
(4.5 | ) | (4.9 | ) | (15.2 | ) | (14.7 | ) | ||||||||
Gain (loss) on investments, net |
(1.3 | ) | 2.1 | (3.4 | ) | 2.3 | ||||||||||
Total other income (loss), net |
(3.5 | ) | 1.7 | (9.9 | ) | (3.5 | ) | |||||||||
Earnings before income taxes |
158.3 | 141.1 | 428.0 | 387.5 | ||||||||||||
Provision for income taxes |
38.4 | 32.0 | 97.7 | 53.8 | ||||||||||||
Net earnings |
$ | 119.9 | $ | 109.1 | $ | 330.3 | $ | 333.7 | ||||||||
Basic earnings per share |
$ | 0.72 | $ | 0.61 | $ | 1.92 | $ | 1.87 | ||||||||
Diluted earnings per share |
$ | 0.71 | $ | 0.60 | $ | 1.88 | $ | 1.83 | ||||||||
Shares used in computing basic earnings per share |
167.2 | 178.2 | 172.0 | 178.7 | ||||||||||||
Shares used in computing diluted earnings per share |
169.5 | 182.3 | 175.2 | 182.2 | ||||||||||||
Net earnings |
$ | 119.9 | $ | 109.1 | $ | 330.3 | $ | 333.7 | ||||||||
Other comprehensive income (net of tax): |
||||||||||||||||
Foreign currency translation adjustment |
17.4 | 5.9 | (15.9 | ) | 12.6 | |||||||||||
Unrealized gain (loss) on available-for-sale securities |
0.3 | 1.3 | (0.6 | ) | 1.3 | |||||||||||
Total other comprehensive income (loss) |
17.7 | 7.2 | (16.5 | ) | 13.9 | |||||||||||
Total comprehensive income |
$ | 137.6 | $ | 116.3 | $ | 313.8 | $ | 347.6 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents
BMC SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ | 330.3 | $ | 333.7 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
161.6 | 140.1 | ||||||
Deferred income tax provision (benefit) |
(2.5 | ) | 22.6 | |||||
Share-based compensation expense |
92.7 | 76.3 | ||||||
Loss (gain) on investments, net and other |
2.4 | (2.3 | ) | |||||
Changes in operating assets and liabilities, net of acquisitions: |
||||||||
Trade accounts receivable |
47.1 | (107.3 | ) | |||||
Trade finance receivables |
91.9 | 103.8 | ||||||
Prepaid and other current assets |
6.3 | (6.0 | ) | |||||
Other long-term assets |
17.8 | (1.2 | ) | |||||
Accrued and other current liabilities |
(47.8 | ) | (20.4 | ) | ||||
Deferred revenue |
(88.6 | ) | (13.6 | ) | ||||
Other long-term liabilities |
(9.1 | ) | (37.2 | ) | ||||
Other operating assets and liabilities |
(14.7 | ) | (13.7 | ) | ||||
Net cash provided by operating activities |
587.4 | 474.8 | ||||||
Cash flows from investing activities: |
||||||||
Proceeds from maturities of investments |
24.8 | 50.0 | ||||||
Proceeds from sales of investments |
4.4 | 34.0 | ||||||
Purchases of investments |
(30.0 | ) | (8.2 | ) | ||||
Cash paid for acquisitions, net of cash acquired |
(163.0 | ) | (51.0 | ) | ||||
Capitalization of software development costs |
(97.7 | ) | (88.6 | ) | ||||
Purchases of property and equipment |
(17.6 | ) | (18.4 | ) | ||||
Other investing activities |
| 1.0 | ||||||
Net cash used in investing activities |
(279.1 | ) | (81.2 | ) | ||||
Cash flows from financing activities: |
||||||||
Treasury stock acquired |
(630.5 | ) | (299.0 | ) | ||||
Repurchases of stock to satisfy employee tax withholding obligations |
(31.7 | ) | (19.1 | ) | ||||
Proceeds from stock options exercised and other |
41.9 | 101.3 | ||||||
Excess tax benefit from share-based compensation expense |
13.6 | 13.2 | ||||||
Repayments of borrowings and capital lease obligations |
(20.7 | ) | (20.6 | ) | ||||
Proceeds from borrowings, net of issuance costs |
| (1.9 | ) | |||||
Net cash used in financing activities |
(627.4 | ) | (226.1 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
(22.3 | ) | 8.0 | |||||
Net change in cash and cash equivalents |
(341.4 | ) | 175.5 | |||||
Cash and cash equivalents, beginning of period |
1,660.9 | 1,368.6 | ||||||
Cash and cash equivalents, end of period |
$ | 1,319.5 | $ | 1,544.1 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for interest |
$ | 22.7 | $ | 22.7 | ||||
Cash paid for income taxes, net of amounts refunded |
$ | 20.8 | $ | 50.3 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Table of Contents
BMC SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the
accounts of BMC Software, Inc. and its subsidiaries (collectively, we, us, our or BMC).
All significant intercompany balances and transactions have been eliminated in
consolidation. These financial statements reflect all normal recurring adjustments
necessary to fairly present our financial position and results of operations as of and
for the periods presented herein. These financial statements have been prepared in
accordance with United States generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X of the Securities and Exchange Commission (SEC). Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted pursuant to such rules and regulations. Certain
reclassifications have been made to the prior periods financial statements to conform to
the current periods presentation.
Interim results are not necessarily indicative of results for a full year. Our
results reflect the seasonality of our business and generally tend to be stronger in the
third and fourth quarters of our fiscal year, as compared to the first and second
quarters of our fiscal year; however, general economic conditions also have an impact on
our business and financial results. These financial statements should be read in
conjunction with our annual audited consolidated financial statements for the fiscal year
ended March 31, 2011, as filed with the SEC on Form 10-K.
Adjustments Recorded in Current Period
During the quarter ended December 31, 2011, we corrected the accounting for the
foreign currency impacts of certain intangible assets and related deferred taxes
associated with a fiscal 2000 business combination. The correction of these errors had
the effect in the current quarter of decreasing intangible asset amortization expense by
$4.5 million, increasing the provision for income taxes by $3.2 million and increasing
the foreign currency translation adjustment (a component of other comprehensive income)
by $29.2 million, resulting in increases to net earnings and comprehensive income of $1.3
million and $30.5 million, respectively.
We do not consider the impact of these corrections, which relate to financial
statement periods dating back to fiscal 2000 (errors impacting net earnings primarily
related to fiscal 2003 and prior periods), to be material to any prior fiscal year
presented in our most recent Annual Report on Form 10-K for the fiscal year ended March
31, 2011 or to the current fiscal year.
Recently Adopted Accounting Pronouncements
In December 2010 and in September 2011, the Financial Accounting Standards Board
(FASB) issued updated guidance relating to the annual goodwill impairment test. This new
guidance incorporates additional qualitative assessments at two discrete points in the
goodwill impairment evaluation. First, entities are now permitted to perform an initial
qualitative assessment of whether it is more likely than not that goodwill is impaired in
order to determine the need to perform the previously required two-step impairment test.
This new guidance has been early adopted by us and will be applied for our fiscal 2012
annual goodwill impairment test. Additionally, as part of step one of the two-step
impairment test, entities are required to perform a qualitative assessment of whether it
is more likely than not that goodwill is impaired in situations where reporting units
have a carrying value that is zero or negative. If the qualitative evaluation determines
that it is more likely than not that goodwill is impaired, step two of the goodwill
impairment test is required to be performed to determine the amount of impairment, if
any. This guidance is effective for us beginning with our fiscal 2012 goodwill
impairment test. Neither set of guidance is expected to have a material effect on our
financial position, results of operations or cash flows.
In October 2009, the FASB issued new revenue recognition guidance for arrangements
that include both software and non-software related deliverables. This guidance requires
entities to allocate the overall consideration to each deliverable by using a best
estimate of the selling price of individual deliverables in the arrangement in the
absence of vendor-specific objective evidence (VSOE) or other third party evidence of the
selling price. Additionally, the guidance modifies the manner in which the transaction
consideration is allocated across the separately identified deliverables by no longer
permitting the residual method of allocating arrangement consideration. The new guidance
was effective for us in the first quarter of fiscal 2012 and did not have a material
effect on our financial position, results of operations or cash flows.
6
Table of Contents
(2) Business Combinations
In April 2011, we acquired all of the outstanding shares of Coradiant Inc.
(Coradiant), a global provider of end-to-end performance management of web applications,
for total cash consideration of $130.0 million. Coradiants operating results have been
included in our condensed consolidated financial statements since the acquisition date.
This acquisition expands BMCs current application performance management offering to
provide real-time insight into application performance and its impact on user behavior
across enterprise, software-as-a-service (SaaS) and cloud environments. The purchase
consideration was allocated to acquired assets and assumed liabilities consisting
primarily of $18.1 million of acquired technology and $22.7 million of customer
relationships, both with a weighted average economic life of three years, in addition to
other tangible assets and liabilities. This acquisition resulted in a preliminary
allocation of $93.2 million to goodwill assigned to our Enterprise Service Management
(ESM) segment. Factors that contributed to a purchase price that resulted in goodwill
include, but are not limited to, the retention of research and development personnel
with the skills to develop future Coradiant technology, support personnel to provide
maintenance services related to Coradiant products and a trained sales force capable of
selling current and future Coradiant products and the opportunity to cross-sell our
products and Coradiant products to existing customers.
In June 2011, we also completed the acquisitions of Aeroprise, Inc., a provider of
mobile IT service management solutions, as part of our ESM segment, and Neon Enterprise
Software, LLCs portfolio of IMS solution software as part of our Mainframe Service
Management (MSM) segment, for combined purchase consideration of $21.0 million. The
purchase consideration was allocated to acquired assets and assumed liabilities
consisting primarily of $11.2 million of acquired technology, with weighted average
economic lives of approximately three years, in addition to other tangible assets and
liabilities. These acquisitions resulted in an allocation of $7.7 million to goodwill
assigned to our ESM segment and $6.0 million assigned to our MSM segment.
In December 2011, we completed the acquisition of I/O Concepts Software Corporation,
a provider of mainframe management and security solutions, for total purchase
consideration of $14.1 million. The purchase consideration was preliminarily allocated
to acquired assets and assumed liabilities consisting primarily of $8.3 million of
acquired technology, with a weighted average economic life of approximately three years,
in addition to other tangible assets and liabilities. This acquisition resulted in a
preliminary allocation of $9.2 million to goodwill assigned to our MSM segment.
We are in the process of finalizing our assessment of the fair value of certain
acquired assets and assumed liabilities for the above acquisitions and will adjust the
purchase price allocations when finalized.
(3) Financial Instruments
We measure certain financial instruments at fair value on a recurring basis using
the following valuation techniques:
(A) Market approach Uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities.
(B) Income approach Uses valuation techniques to convert future estimated cash flows
to a single present amount based on current market expectations about those future
amounts, using present value techniques.
7
Table of Contents
The fair values of our financial instruments were determined using the following input
levels and valuation techniques:
Fair Value Measurements at Reporting Date Using | ||||||||||||||||||
Quoted Prices in Active | Significant | |||||||||||||||||
Markets for Identical | Significant Other | Unobservable | ||||||||||||||||
Assets | Observable Inputs | Inputs | Valuation | |||||||||||||||
December 31, 2011 | Total | (Level 1) | (Level 2) | (Level 3) | Technique | |||||||||||||
(In millions) | ||||||||||||||||||
Assets |
||||||||||||||||||
Cash equivalents |
||||||||||||||||||
Money-market funds |
$ | 357.1 | $ | 357.1 | $ | | $ | | A | |||||||||
Certificates of deposit |
55.5 | 55.5 | | | A | |||||||||||||
Short-term and long-term investments |
||||||||||||||||||
United States Treasury securities |
50.0 | 50.0 | | | A | |||||||||||||
Auction rate securities |
25.9 | | | 25.9 | B | |||||||||||||
Mutual funds |
18.6 | 18.6 | | | A | |||||||||||||
Foreign currency forward contracts |
4.9 | | 4.9 | | A | |||||||||||||
Total |
$ | 512.0 | $ | 481.2 | $ | 4.9 | $ | 25.9 | ||||||||||
Liabilities |
||||||||||||||||||
Foreign currency forward contracts |
$ | 2.1 | $ | | $ | 2.1 | $ | | A | |||||||||
Total |
$ | 2.1 | $ | | $ | 2.1 | $ | | ||||||||||
Level 1 classification is applied to any asset or liability that has a readily
available quoted market price from an active market where there is significant
transparency in the executed/quoted price.
Level 2 classification is applied to assets and liabilities that have evaluated
prices where the data inputs to these valuations are observable either directly or
indirectly, but do not represent quoted market prices from an active market.
Level 3 classification is applied to assets and liabilities when prices are not
derived from existing market data and requires us to develop our own assumptions about
how market participants would value the asset or liability.
8
Table of Contents
The following tables summarize the activity in Level 3 financial instruments for the
quarters and nine months ended December 31, 2011 and 2010, respectively:
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||||||||||||||
Auction | Auction | |||||||||||||||||||||||
Rate | Put | Rate | Put | |||||||||||||||||||||
Securities | Option | Total | Securities | Option | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Balance at the beginning of the period |
$ | 25.6 | $ | | $ | 25.6 | $ | 27.2 | $ | | $ | 27.2 | ||||||||||||
Redemption of auction rate securities |
(0.1 | ) | | (0.1 | ) | (0.5 | ) | | (0.5 | ) | ||||||||||||||
Change in unrealized gain (loss) included in
other comprehensive income |
0.4 | | 0.4 | (0.8 | ) | | (0.8 | ) | ||||||||||||||||
Balance at the end of the period |
$ | 25.9 | $ | | $ | 25.9 | $ | 25.9 | $ | | $ | 25.9 | ||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||||||||||||||
Auction | Auction | |||||||||||||||||||||||
Rate | Put | Rate | Put | |||||||||||||||||||||
Securities | Option | Total | Securities | Option | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Balance at the beginning of the period |
$ | 33.9 | $ | | $ | 33.9 | $ | 60.5 | $ | 1.1 | $ | 61.6 | ||||||||||||
Redemption of auction rate securities |
(0.1 | ) | | (0.1 | ) | (27.6 | ) | | (27.6 | ) | ||||||||||||||
Change in unrealized gain (loss) included in
interest and other income, net |
| | | 1.1 | (1.1 | ) | | |||||||||||||||||
Change in unrealized gain included in
other comprehensive income |
1.6 | | 1.6 | 1.4 | | 1.4 | ||||||||||||||||||
Balance at the end of the period |
$ | 35.4 | $ | | $ | 35.4 | $ | 35.4 | $ | | $ | 35.4 | ||||||||||||
9
Table of Contents
Investments
Our cash, cash equivalents and investments were comprised of the following:
December 31, 2011 | March 31, 2011 | |||||||||||||||||||||||
Cash and | Cash and | |||||||||||||||||||||||
Cash | Short-term | Long-term | Cash | Short-term | Long-term | |||||||||||||||||||
Equivalents | Investments | Investments | Equivalents | Investments | Investments | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Measured at fair value: |
||||||||||||||||||||||||
Available-for-sale |
||||||||||||||||||||||||
United States Treasury securities |
$ | | $ | 37.1 | $ | 12.9 | $ | 525.0 | $ | 27.8 | $ | 22.1 | ||||||||||||
Certificates of deposit |
55.5 | | | 38.4 | | | ||||||||||||||||||
Auction rate securities |
| | 25.9 | | | 27.2 | ||||||||||||||||||
Trading |
||||||||||||||||||||||||
Mutual funds |
| | 18.6 | | | 18.5 | ||||||||||||||||||
Total debt and equity investments
measured at fair value |
55.5 | 37.1 | 57.4 | 563.4 | 27.8 | 67.8 | ||||||||||||||||||
Cash on hand |
906.9 | | | 412.8 | | | ||||||||||||||||||
Money-market funds |
357.1 | | | 684.7 | | | ||||||||||||||||||
Total cash, cash equivalents and
investments |
$ | 1,319.5 | $ | 37.1 | $ | 57.4 | $ | 1,660.9 | $ | 27.8 | $ | 67.8 | ||||||||||||
Amounts included in accumulated other
comprehensive income from
available-for-sale
securities (pre-tax): |
||||||||||||||||||||||||
Unrealized losses* |
$ | | $ | | $ | 3.4 | $ | | $ | | $ | 2.6 | ||||||||||||
* | The unrealized losses on available-for-sale securities at December 31, 2011 and
March 31, 2011 relate to the auction rate securities. |
The following summarizes the underlying contractual maturities of our
available-for-sale investments in debt securities at December 31, 2011:
Fair | ||||||||
Cost | Value | |||||||
(In millions) | ||||||||
Due in one year or less |
$ | 92.6 | $ | 92.6 | ||||
Due between one and two years |
12.9 | 12.9 | ||||||
Due after ten years |
29.3 | 25.9 | ||||||
Total |
$ | 134.8 | $ | 131.4 | ||||
At December 31, 2011 and March 31, 2011, we held auction rate securities with a
par value of $29.3 million and $29.8 million, respectively, which were classified as
available-for-sale. The total estimated fair value of our auction rate securities was
$25.9 million and $27.2 million at December 31, 2011 and March 31, 2011, respectively.
Our auction rate securities consist entirely of bonds issued by public agencies that are
backed by student loans with at least a 97% guarantee by the federal government under the
United States Department of Educations Federal Family Education Loan Program. All of
these bonds are currently rated investment grade by Moodys or Standard and Poors.
Auctions for these securities began failing in early 2008 and have continued to fail,
resulting in our continuing to hold such securities and the issuers paying interest at
the maximum contractual rates. We do not believe that any of the underlying issuers of
these auction rate securities are presently at risk of default or that the underlying
credit quality of the assets backing the auction rate security investments has been
impacted by the reduced liquidity of these investments. Due to the illiquidity in the
auction rate securities market caused by failed auctions, we estimated the fair value of
these securities and the put option discussed below using internally developed models of
the expected cash flows of the securities which incorporate assumptions about the
expected cash flows of the underlying student loans and estimates of the rate of return
required by investors, which includes an adjustment to reflect a lack of liquidity in the
market for these securities. Periodically, the issuers of certain of our auction rate
securities have redeemed portions of our holdings at par value plus accrued interest.
During the quarter and nine months ended December 31, 2011, issuers redeemed
available-for-sale holdings of $0.1 million and $0.5 million, respectively. During the
quarter and nine months ended December 31, 2010, issuers redeemed available-for-sale
holdings of $0.1 million and $11.0 million, respectively, and trading holdings of $5.4
million during the nine months ended December 31, 2010.
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In November 2008, we entered into a put agreement with a bank from which we
acquired certain auction rate securities. On July 1, 2010, we exercised our right under
this agreement to put the remaining securities subject to this agreement, with $11.2
million par value, to the bank. The auction rate securities subject to the put were
classified as short-term investments and trading securities and, accordingly, any changes
in the fair value of these securities were recognized in earnings. In addition, we
elected the option under GAAP to record the put option at fair value. The fair value
adjustments to these auction rate securities and the related put option, prior to the
exercise of the put on July 1, 2010, resulted in minimal net impact to the condensed
consolidated statement of operations for the quarter and nine months ended December 31,
2010.
The unrealized loss on our available-for-sale auction rate securities, which have a
fair value of $25.9 million at December 31, 2011, was $3.4 million and was recorded in
accumulated other comprehensive income (loss) as we believe the decline in fair value of
these auction rate securities is temporary. In making this determination, we primarily
considered the financial condition and near-term prospects of the issuers, the
probability scheduled cash flows will continue to be made and the likelihood we would be
required to sell the investments before recovery of our cost basis. These
available-for-sale auction rate securities have been in an unrealized loss position for
greater than twelve months. Because of the uncertainty related to the timing of liquidity
associated with these auction rate securities, these securities are classified as
long-term investments at December 31, 2011 and March 31, 2011.
Derivative Financial Instruments
We operate globally and transact business in various foreign currencies. Our foreign
currency exposures relate primarily to certain foreign currency denominated assets and
liabilities, primarily non-U.S. dollar denominated accounts receivable, cash and
intercompany balances held by U.S. dollar functional currency entities. To minimize the
risk from changes in foreign currency exchange rates, we have established a program that
utilizes foreign currency forward contracts to offset the risks associated with the
effects of certain foreign currency exposures. Gains or losses on our foreign currency
exposures are offset by gains or losses on the foreign currency forward contracts entered
into under this program. These foreign currency forward contracts generally have terms of
one month or less and are generally entered into at the prevailing market exchange rate
at the end of each month. We do not use forward contracts for speculative purposes. While
these foreign currency forward contracts are utilized to hedge foreign currency
exposures, they are not formally designated as hedges, and therefore, the changes in the
fair values of these derivatives are recognized currently in earnings. We record these
foreign currency forward contracts at fair value as either assets or liabilities
depending on their net settlement position with each respective counterparty at the
balance sheet date.
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The fair value of our outstanding foreign currency forward contracts that closed in
a gain position at December 31, 2011 and March 31, 2011 was $4.9 million and $5.8
million, respectively, and was recorded within other current assets in our condensed
consolidated balance sheets. The fair value of our outstanding foreign currency forward
contracts that closed in a loss position at December 31, 2011 and March 31, 2011 was $2.1
million and $3.3 million, respectively, and was recorded within accrued liabilities in
our condensed consolidated balance sheets. The notional amounts at contract exchange
rates of our foreign currency forward contracts outstanding were:
Notional Amount | ||||||||
December 31, | March 31, | |||||||
2011 | 2011 | |||||||
(In millions) | ||||||||
Foreign Currency Forward Contracts (receive
United States dollar/pay foreign currency) |
||||||||
Euro |
$ | 186.0 | $ | 158.5 | ||||
British pound |
33.6 | 5.0 | ||||||
Australian dollar |
19.9 | 13.9 | ||||||
Chinese yuan renminbi |
11.1 | 7.6 | ||||||
Swedish krona |
6.5 | 2.4 | ||||||
Norwegian krone |
5.5 | 2.0 | ||||||
Swiss franc |
5.4 | 1.5 | ||||||
Brazilian real |
5.3 | 5.6 | ||||||
New Zealand dollar |
5.2 | 2.9 | ||||||
Danish krone |
4.3 | 3.0 | ||||||
Singapore dollar |
3.0 | 0.6 | ||||||
South Korean won |
2.8 | 4.6 | ||||||
Canadian dollar |
| 4.2 | ||||||
Other |
3.8 | 1.2 | ||||||
Total |
$ | 292.4 | $ | 213.0 | ||||
Foreign Currency Forward Contracts (pay
United States dollar/receive foreign
currency) |
||||||||
Israeli shekel |
$ | 138.0 | $ | 151.6 | ||||
Indian rupee |
13.3 | 9.1 | ||||||
Canadian dollar |
4.7 | | ||||||
Mexican peso |
| 9.3 | ||||||
Other |
0.6 | 2.2 | ||||||
Total |
$ | 156.6 | $ | 172.2 | ||||
Our use of foreign currency forward exchange contracts is intended to principally
offset gains and losses associated with foreign currency exposures. Therefore, the
notional amounts and currencies underlying our foreign currency forward contracts will
fluctuate period to period as they are principally dependent on the balances and currency
denomination of monetary assets and liabilities maintained by our global entities. The
effect of the foreign currency forward contracts for the quarter and nine months ended
December 31, 2011, was a loss of $1.7 million and $7.6 million, respectively, which,
after including gains and losses on our foreign currency exposures, resulted in net
losses of $0.6 million and $2.5 million, respectively, recorded in interest and other
income, net. The effect of the foreign currency forward contracts for the quarter and
nine months ended December 31, 2010, was a gain of $4.7 million and $11.0 million,
respectively, which, after including gains and losses on our foreign currency exposures,
resulted in a net gain of $0.6 million and a net loss of $2.0 million, respectively,
recorded in interest and other income, net.
We are exposed to credit-related losses in the event of non-performance by
counterparties to derivative financial instruments, but we do not expect any
counterparties to fail to meet their obligations given their high credit ratings. In
addition, we diversify this risk across several counterparties and utilize netting
agreements to mitigate the counterparty credit risk.
Trade Finance Receivables
A substantial portion of our trade finance receivables are transferred to financial
institutions on a non-recourse basis. We utilize wholly-owned finance subsidiaries in
these finance receivables transfers. These entities are consolidated into our financial
position and results of operations. We account for such transfers as sales in accordance
with applicable accounting rules pertaining to the transfer of financial assets and the
sale of future revenue when we have surrendered control of such receivables (including
determining that such assets have been isolated beyond our reach and the reach of our
creditors) and when we do not have significant continuing involvement in the generation
of cash flows due the financial institutions. During the quarter and nine months ended
December 31, 2011, we transferred $49.0 million and $208.0 million, respectively, of such
receivables through these programs. During the quarter and nine months ended December 31,
2010, we transferred $43.4 million and $172.3 million, respectively, of such receivables
through these programs. Finance receivables are typically transferred within several
months after origination and the outstanding principal balance at the time of transfer
typically approximates fair value.
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For those finance receivables not transferred, we evaluate the credit risk of
finance receivables in our portfolio based on regional characteristics specific to the
risk climate in each of our geographic operations as well as based on internal credit
quality indicators for individual receivables. We evaluate the credit risk of finance
receivables using an internal credit rating system based on whether an individual
receivable meets specific internal criteria including counterparty credit rating and
receivable maturity date and assign an internal credit rating of 1, 2 or 3, with a credit
rating of 1 representing the best credit quality.
For all regions and credit categories, a finance receivable will be specifically
reserved once deemed uncollectible. As of December 31, 2011, we held $129.9 million of
finance receivables, net of $0.3 million of specific receivables which have been fully
reserved.
At December 31, 2011, our finance receivables balance, net of allowance, by region
and by class of internal credit rating is as follows:
North America | EMEA | Asia Pacific | Latin America | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Class 1 |
$ | 56.0 | $ | 18.6 | $ | 10.0 | $ | | $ | 84.6 | ||||||||||
Class 2 |
18.1 | 19.1 | 4.9 | 1.2 | 43.3 | |||||||||||||||
Class 3 |
0.1 | 0.3 | 0.7 | 0.9 | 2.0 | |||||||||||||||
Balance at the end of the period |
$ | 74.2 | $ | 38.0 | $ | 15.6 | $ | 2.1 | $ | 129.9 | ||||||||||
Other Financial Instruments
The fair value of our senior unsecured notes due 2018 at December 31, 2011 and March
31, 2011, based on market prices, was $353.0 million and $348.9 million, respectively,
compared to the carrying value of $298.9 million and $298.7 million, respectively.
The carrying values of all other financial instruments, consisting primarily of
trade and finance receivables, accounts payable and other borrowings, approximate their
respective fair values.
(4) Long-Term Borrowings
Long-term borrowings at December 31, 2011 and March 31, 2011 consisted of:
December 31, | March 31, | |||||||
2011 | 2011 | |||||||
(In millions) | ||||||||
Senior unsecured notes due 2018 (net of $1.1 million and $1.3 million of unamortized
discount at December 31, 2011 and March 31, 2011, respectively) |
$ | 298.9 | $ | 298.7 | ||||
Capital leases and other obligations |
47.6 | 56.2 | ||||||
Total |
346.5 | 354.9 | ||||||
Less current maturities of capital leases and other obligations (included in accrued liabilities) |
(21.1 | ) | (19.3 | ) | ||||
Long-term borrowings |
$ | 325.4 | $ | 335.6 | ||||
In November 2010, we entered into a credit agreement with certain institutional
lenders providing for an unsecured revolving credit facility in an amount up to $400.0
million which is scheduled to expire on November 30, 2014 (the Credit Facility). Subject
to certain conditions, at any time prior to maturity, we may invite existing and new
lenders to increase the size of the Credit Facility up to a maximum of $600.0 million.
The Credit Facility includes provisions for swing line loans of up to $25.0 million and
standby letters of credit of up to $50.0 million. Revolving loans under the Credit
Facility bear interest, at the Companys option, at a rate equal to either (i) the base
rate (as defined) plus a margin based on the credit ratings of BMCs senior unsecured
notes due 2018 (the Senior Notes), or (ii) the LIBOR rate (as defined) plus a margin
based on the credit ratings of BMCs Senior Notes, for interest periods of one, two,
three or six months. As of December 31, 2011 and through February 1, 2012, we have not
borrowed any funds under the Credit Facility.
At December 31, 2011, we were in compliance with all debt covenants.
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(5) Income Taxes
Income tax expense was $38.4 million and $97.7 million for the quarter and nine
months ended December 31, 2011, respectively, resulting in effective tax rates of 24.3%
and 22.8%, respectively. Income tax expense was $32.0 million and $53.8 million for the
quarter and nine months ended December 31, 2010, respectively, resulting in effective tax
rates of 22.7% and 13.9%, respectively. Our effective tax rate generally differs from the
U.S. federal statutory rate of 35% due to favorable tax rates associated with earnings
from lower tax rate jurisdictions throughout the world and our policy of indefinitely
reinvesting earnings from certain jurisdictions (primarily in Europe), as well as due to
additional accruals, changes in estimates, releases and settlements with taxing
authorities related to our uncertain tax positions and benefits associated with income
attributable to both domestic production activities and the extraterritorial income
exclusion. During the quarter and nine months ended December 31, 2011, the overall
favorable effects of foreign tax rates on our effective tax rate were 7.3% and 8.6% of
pre-tax earnings, respectively. During the quarter and nine months ended December 31,
2010, the overall favorable effects of foreign tax rates on our effective tax rate were
10.9% and 11.7% of pre-tax earnings, respectively. During the nine months ended December
31, 2011 and 2010, we also recorded discrete net tax benefits of $6.2 million and $32.0
million, respectively, associated with tax authority settlements related to prior years
tax matters which favorably impacted our effective tax rate by 1.4% and 8.3% of pre-tax
earnings, respectively. Our effective tax rate could fluctuate on a quarterly basis and
could be adversely affected to the extent earnings are lower than anticipated in
countries with lower statutory rates and higher than anticipated in countries with higher
statutory rates.
We file a federal income tax return in the United States as well as income tax
returns in various local, state and foreign jurisdictions. Our tax years are closed with
the United States Internal Revenue Service (IRS) through the tax year ended March 31,
2007 except for one issue related to the year ended March 31, 2006. We received a Notice
of Deficiency from the IRS related to this issue and in July 2011 filed a petition for
hearing with the U.S. Tax Court. A trial date has been scheduled for May 2012. The IRS
has initiated an examination of our federal income tax returns for the years ended March
31, 2009 and 2010. In addition, certain tax years related to local, state and foreign
jurisdictions remain subject to examination. To provide for potential tax exposures, we
maintain a liability for unrecognized tax benefits which we believe is adequate.
(6) Share-Based Compensation
During
the quarter ended December 31, 2011, we granted 1.7 million and 0.2
million time-based nonvested stock units and market-based nonvested
stock units, respectively, at a weighted average grant date fair
value of $36.02 and $32.19, respectively, to our executive officers, non-executive
employees and non-employee board members. During the nine months
ended December 31, 2011, we granted 3.1 million and 0.4 million
time-based nonvested stock units and market-based nonvested stock
units, respectively, at a weighted average grant date fair value of
$43.58 and $42.23, respectively, to our executive officers,
non-executive employees and non-employee board members. Time-based
nonvested stock units vest in annual increments over one or three
years. Market-based nonvested stock units vest in 50% increments over
two- and three-year periods upon achievement of certain targets
related to our relative shareholder return as compared to the
NASDAQ-100 Index over each performance period.
During the quarter and nine months ended December 31, 2011, we issued 0.3 million
and 1.3 million shares of common stock, respectively, related to exercises of stock
options and 0.7 million and 2.2 million shares of common stock, respectively, related to
vesting of restricted stock units.
At December 31, 2011, we had approximately $237.5 million of total unrecognized
compensation costs related to share-based awards that are expected to be recognized as
expense over a remaining weighted-average period of two years.
Share-based compensation expense as recorded in our condensed consolidated
statements of operations is summarized as follows:
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Cost of license revenue |
$ | 1.1 | $ | 0.9 | $ | 3.4 | $ | 2.4 | ||||||||
Cost of maintenance revenue |
3.7 | 2.5 | 11.0 | 7.0 | ||||||||||||
Cost of professional services revenue |
1.4 | 1.3 | 3.9 | 3.5 | ||||||||||||
Selling and marketing expenses |
9.3 | 8.2 | 28.4 | 25.7 | ||||||||||||
Research and development expenses |
3.1 | 2.3 | 9.6 | 7.1 | ||||||||||||
General and administrative expenses |
12.5 | 10.1 | 36.4 | 30.6 | ||||||||||||
Total share-based compensation expense |
$ | 31.1 | $ | 25.3 | $ | 92.7 | $ | 76.3 | ||||||||
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(7) Stockholders Equity
Earnings Per Share
The two-class method is utilized for the computation of earnings per share (EPS).
The two-class method requires a portion of net income to be allocated to participating
securities, which are unvested awards of share-based payments with non-forfeitable rights
to receive dividends or dividend equivalents, if declared. Income allocated to these
participating securities is excluded from net earnings allocated to common shares, as
shown in the table below.
Basic earnings per share is computed by dividing net income allocated to common
shares by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing net income allocated to common shares
by the weighted average number of common shares outstanding during the period, plus the
dilutive effect of outstanding stock options and other dilutive securities using the
treasury stock method.
The following table summarizes our basic and diluted EPS computations for the
quarters and nine months ended December 31, 2011 and 2010:
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions, except per share data) | ||||||||||||||||
Basic earnings per share: |
||||||||||||||||
Net earnings |
$ | 119.9 | $ | 109.1 | $ | 330.3 | $ | 333.7 | ||||||||
Less earnings allocated to participating securities |
| (0.1 | ) | | (0.3 | ) | ||||||||||
Net earnings allocated to common shares |
$ | 119.9 | $ | 109.0 | $ | 330.3 | $ | 333.4 | ||||||||
Weighted average number of common shares outstanding |
167.2 | 178.2 | 172.0 | 178.7 | ||||||||||||
Basic earnings per share |
$ | 0.72 | $ | 0.61 | $ | 1.92 | $ | 1.87 | ||||||||
Diluted earnings per share: |
||||||||||||||||
Net earnings |
$ | 119.9 | $ | 109.1 | $ | 330.3 | $ | 333.7 | ||||||||
Less earnings allocated to participating securities |
| (0.1 | ) | | (0.3 | ) | ||||||||||
Net earnings allocated to common shares |
$ | 119.9 | $ | 109.0 | $ | 330.3 | $ | 333.4 | ||||||||
Weighted average number of common shares outstanding |
167.2 | 178.2 | 172.0 | 178.7 | ||||||||||||
Incremental shares from assumed conversions of share-based awards |
2.3 | 4.1 | 3.2 | 3.5 | ||||||||||||
Adjusted weighted average number of common shares outstanding |
169.5 | 182.3 | 175.2 | 182.2 | ||||||||||||
Diluted earnings per share |
$ | 0.71 | $ | 0.60 | $ | 1.88 | $ | 1.83 | ||||||||
For the quarter and nine months ended December 31, 2011, 4.9 million and 1.8 million
weighted average potential common shares, respectively, have been excluded from the
calculation of diluted EPS as they were anti-dilutive. For the quarter and nine months
ended December 31, 2010, 0.4 million and 3.2 million weighted average potential common
shares, respectively, have been excluded from the calculation of diluted EPS as they were
anti-dilutive.
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Treasury Stock
Our Board of Directors had previously authorized a total of $4.0 billion to
repurchase common stock. In October 2011, our Board of Directors authorized an additional
$1.0 billion to repurchase stock. During the quarter and nine months ended December 31,
2011, we repurchased 6.3 million and 15.1 million shares, respectively, for $225.0
million and $630.5 million, respectively, under the stock repurchase program. At December
31, 2011, approximately $1.0 billion remains authorized in the stock repurchase program,
which does not have an expiration date. In addition, during the quarter and nine months
ended December 31, 2011, we repurchased 0.2 million and 0.6 million shares, respectively,
for $8.7 million and $31.7 million, respectively, to satisfy employee tax withholding
obligations upon the vesting of share-based awards.
(8) Guarantees and Contingencies
Guarantees
Under our standard software license agreements, we agree to indemnify, defend and
hold harmless our licensees from and against certain losses, damages and costs arising
from claims alleging the licensees use of our software infringes the intellectual
property rights of a third party. Also, under these standard license agreements, we
represent and warrant to licensees that our software products operate substantially in
accordance with published specifications.
Other guarantees include promises to indemnify, defend and hold harmless each of our
executive officers, non-employee directors and certain key employees from and against
losses, damages and costs incurred by each such individual in administrative, legal or
investigative proceedings arising from alleged wrongdoing by the individual while acting
in good faith within the scope of his or her job duties on our behalf.
We also had outstanding letters of credit, performance bonds and similar instruments
at December 31, 2011 of approximately $31.6 million primarily in support of performance
obligations to various customers, but also related to facilities and other obligations.
Historically, we have not incurred significant costs related to such
indemnifications, warranties and guarantees. As such, and based on other factors, no
provision or accrual for these items has been made.
Contingencies
We previously disclosed a lawsuit filed against a number of software companies,
including us, by Uniloc USA, Inc. and Uniloc Singapore Private Limited in the United
States District Court for the Eastern District of Texas, Tyler Division. The complaint
sought monetary damages in unspecified amounts and permanent injunction based upon claims
for alleged patent infringement. On September 30, 2011, we entered into a Settlement and
License Agreement with various Uniloc parties completely settling and dismissing the
lawsuit and granting us a permanent license to the intellectual property at issue.
We are party to various labor claims brought by certain former international
employees alleging that amounts are due to such employees for unpaid commissions and
other compensation. The claims are in various stages and are not expected to be fully
resolved in the near future; however, we intend to vigorously contest all of the claims.
Taking into account accruals recorded by us, we believe the likelihood of a material
adverse effect on our financial statements resulting from these claims is remote.
However, we cannot predict the timing or ultimate outcome of these matters.
We are currently litigating a matter in Brazilian courts as to whether a tax applies
to the remittance of software payments from our Brazilian operations. In February 2007, a
law was enacted that clarified that this particular tax did not apply to the remittance
of software payments, retroactive to January 1, 2006. We continue to pursue a favorable
resolution on this matter for years prior to January 1, 2006. While we believe we will
ultimately prevail based on the merits of our position, if we do not, we could incur a
charge of up to approximately $13 million based on current exchange rates; however, we
cannot predict the timing or ultimate outcome of this matter.
We are subject to various other legal proceedings and claims, either asserted or
unasserted, which arise in the ordinary course of business. Taking into account accruals
recorded by us, we believe the likelihood of a material adverse effect on our financial
statements resulting from any of these matters is remote.
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(9) Segment Reporting
We are organized into two business segments, Enterprise Service Management (ESM) and
Mainframe Service Management (MSM). The ESM segment derives its revenue from our service
support, service assurance and service automation solutions, along with professional
services revenue derived from consulting, implementation, integration and educational
services related to our software products. The MSM segment derives its revenue from
products for mainframe database management, monitoring and automation, middleware
management, enterprise scheduling and output management solutions.
Segment performance is measured based on segment operating income, reflecting
segment revenue less direct and allocated indirect segment operating expenses. Direct
segment operating expenses primarily include cost of revenue, selling and marketing,
research and development and general and administrative expenses that can be specifically
identified to a particular segment and are directly controllable by segment management,
while allocated indirect segment operating expenses primarily include indirect costs
within these operating expense categories that are not specifically identified to a
particular segment or controllable by segment management. The indirect operating expenses
are allocated to the segments based on budgeted bookings, revenue and other allocation
methods that management believes to be reasonable. Our measure of segment operating
income does not include the effect of share-based compensation expenses, amortization of
acquired technology and other intangible assets or the costs associated with severance,
exit costs and related charges, which are collectively included in unallocated operating
expenses below. Assets and liabilities are reviewed by management at the consolidated
level only.
The following tables summarize segment performance for the quarters and nine months ended
December 31, 2011 and 2010:
Enterprise | Mainframe | |||||||||||
Service | Service | |||||||||||
Quarter Ended December 31, 2011 | Management | Management | Consolidated | |||||||||
(In millions) | ||||||||||||
Revenue: |
||||||||||||
License |
$ | 133.7 | $ | 91.3 | $ | 225.0 | ||||||
Maintenance |
147.7 | 124.6 | 272.3 | |||||||||
Professional services |
50.9 | | 50.9 | |||||||||
Total revenue |
332.3 | 215.9 | 548.2 | |||||||||
Direct and allocated indirect
segment operating expenses: |
256.1 | 79.4 | 335.5 | |||||||||
Segment operating income |
76.2 | 136.5 | 212.7 | |||||||||
Unallocated operating expenses |
(50.9 | ) | ||||||||||
Other loss, net |
(3.5 | ) | ||||||||||
Earnings before income taxes |
$ | 158.3 | ||||||||||
Enterprise | Mainframe | |||||||||||
Service | Service | |||||||||||
Quarter Ended December 31, 2010 | Management | Management | Consolidated | |||||||||
(In millions) | ||||||||||||
Revenue: |
||||||||||||
License |
$ | 148.9 | $ | 85.7 | $ | 234.6 | ||||||
Maintenance |
139.9 | 119.4 | 259.3 | |||||||||
Professional services |
46.0 | | 46.0 | |||||||||
Total revenue |
334.8 | 205.1 | 539.9 | |||||||||
Direct and allocated indirect
segment operating expenses: |
263.2 | 89.2 | 352.4 | |||||||||
Segment operating income |
71.6 | 115.9 | 187.5 | |||||||||
Unallocated operating expenses |
(48.1 | ) | ||||||||||
Other income, net |
1.7 | |||||||||||
Earnings before income taxes |
$ | 141.1 | ||||||||||
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Enterprise | Mainframe | |||||||||||
Service | Service | |||||||||||
Nine Months Ended December 31, 2011 | Management | Management | Consolidated | |||||||||
(In millions) | ||||||||||||
Revenue: |
||||||||||||
License |
$ | 398.2 | $ | 246.0 | $ | 644.2 | ||||||
Maintenance |
434.5 | 372.9 | 807.4 | |||||||||
Professional services |
155.7 | | 155.7 | |||||||||
Total revenue |
988.4 | 618.9 | 1,607.3 | |||||||||
Direct and allocated indirect segment operating expenses: |
763.8 | 243.9 | 1,007.7 | |||||||||
Segment operating income |
224.6 | 375.0 | 599.6 | |||||||||
Unallocated operating expenses |
(161.7 | ) | ||||||||||
Other loss, net |
(9.9 | ) | ||||||||||
Earnings before income taxes |
$ | 428.0 | ||||||||||
Enterprise | Mainframe | |||||||||||
Service | Service | |||||||||||
Nine Months Ended December 31, 2010 | Management | Management | Consolidated | |||||||||
(In millions) | ||||||||||||
Revenue: |
||||||||||||
License |
$ | 393.4 | $ | 220.5 | $ | 613.9 | ||||||
Maintenance |
413.4 | 352.2 | 765.6 | |||||||||
Professional services |
123.6 | | 123.6 | |||||||||
Total revenue |
930.4 | 572.7 | 1,503.1 | |||||||||
Direct and allocated indirect segment operating expenses: |
717.0 | 250.4 | 967.4 | |||||||||
Segment operating income |
213.4 | 322.3 | 535.7 | |||||||||
Unallocated operating expenses |
(144.7 | ) | ||||||||||
Other loss, net |
(3.5 | ) | ||||||||||
Earnings before income taxes |
$ | 387.5 | ||||||||||
(10) New Accounting Pronouncements Not Yet Adopted
In May 2011, the FASB issued updated guidance for fair value measurements, primarily
clarifying existing guidance and adding new disclosure requirements for Level 3 fair
value measurements. This guidance requires entities to disclose quantitative information
about the significant unobservable inputs used in Level 3 measurements, and to provide
additional qualitative information regarding the valuation process in place for Level 3
measurements and the sensitivity of recurring Level 3 fair value measurements to changes
in unobservable inputs used. This new guidance is effective for us beginning with our
fourth quarter of fiscal 2012 and is not expected to have a material effect on our
financial position, results of operations or cash flows.
In December 2011, the FASB issued guidance requiring new disclosures regarding
balance sheet offsetting. This guidance requires entities to disclose the gross amounts
of certain recognized financial assets and liabilities, to reconcile these amounts to the
net positions recognized in the balance sheet and to provide qualitative disclosures
about the rights of offset relating to these financial assets and liabilities. This new
disclosure guidance is effective for us beginning with our first quarter of fiscal 2014.
(11) Subsequent Event
In January 2012, we announced our pending acquisition of Numara
Software Holdings, Inc. (Numara), a leading global provider of
integrated IT management solutions for mid-market companies. Subject
to completion, we will acquire Numara for cash consideration of
approximately $300 million. The completion of the acquisition is
subject to customary closing conditions.
18
Table of Contents
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
It is important that this Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) be read in conjunction with: (i) the attached
unaudited condensed consolidated financial statements and notes thereto, (ii) the audited
consolidated financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended March 31, 2011, and (iii) our discussion of risks and
uncertainties included within the section entitled Risk Factors in our Annual Report on
Form 10-K for the year ended March 31, 2011.
This MD&A contains certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, which are identified by the use of the words believe,
expect, anticipate, estimate, will, contemplate, would and similar
expressions that contemplate future events. Such forward-looking statements are based on
managements reasonable current assumptions and expectations. Numerous important factors,
risks and uncertainties, including but not limited to those summarized under Risk Factors
in our Annual Report on Form 10-K for the year ended March 31, 2011, affect our operating
results and could cause our actual results, levels of activity, performance or
achievement to differ materially from the results expressed or implied by these or any
other forward-looking statements made by us or on our behalf. There can be no assurance
that future results will meet expectations.
BMC, BMC Software and the BMC Software logo are the exclusive properties of BMC
Software, Inc., are registered with the U.S. Patent and Trademark Office, and may be
registered or pending registration in other countries. All other BMC trademarks, service
marks and logos may be registered or pending registration in the U.S. or in other
countries. All other trademarks or registered trademarks are the property of their
respective owners.
Unless indicated otherwise, results of operations data in this MD&A are presented in
accordance with United States generally accepted accounting principles (GAAP).
Additionally, in an effort to provide investors with additional information regarding our
results of operations, certain non-GAAP financial measures including non-GAAP operating
income, non-GAAP net earnings and non-GAAP diluted earnings per share are provided in
this MD&A. See Non-GAAP Financial Measures and Reconciliations below for an explanation
of our use of non-GAAP financial measures and reconciliations to their corresponding
measures calculated in accordance with GAAP.
19
Table of Contents
Overview
For the quarter and nine months ended December 31, 2011, our financial performance
was solid across most of our core financial metrics. However, year over year ESM license
bookings declined in both the quarter and nine month periods and were below our original
expectations; refer to the additional discussion regarding ESM license bookings below.
Select operating metrics for the quarter and nine months ended December 31, 2011 include:
| Total bookings, which represent the contract value of new transactions that we closed
and recorded, were $524.4 million for the quarter, representing a decrease of $69.7
million, or 11.7%, from the prior year quarter, and for the nine months ended December 31,
2011 were $1,522.2 million, representing an increase of $32.4 million, or 2.2%, over the
prior year period. Within the first nine months of fiscal 2012, one large transaction
generated total bookings of over $100 million, principally related to our MSM business. |
||
| Total license bookings were $236.8 million for the quarter, representing a decrease of
$58.3 million, or 19.8%, from the prior year quarter, and for the nine months ended
December 31, 2011 were $616.8 million, representing a decrease of $34.2 million, or 5.3%,
from the prior year period. During the quarter, we closed 42 transactions with license
bookings over $1 million (with total license bookings of $117.7 million) compared to 44
transactions with license bookings over $1 million (with total license bookings of $153.4
million) in the prior year quarter. During the nine months ended December 31, 2011, we
closed 110 transactions with license bookings over $1 million (with total license bookings
of $336.2 million) compared to 106 transactions with license bookings over $1 million
(with total license bookings of $352.0 million) in the prior year period. |
||
| Within our ESM segment, where we believe performance is best evaluated on the basis of
license bookings, total license bookings for the quarter decreased by $37.1 million, or
22.7%, from the prior year quarter, and for the nine months ended December 31, 2011
decreased by $55.9 million, or 13.7%, from the prior year period. We attribute these
decreases principally to sales-related execution, including a decline in productive sales
capacity caused by sales force attrition as well as a decrease in productivity associated
with a reduction in average sales force tenure and experience levels. ESM license bookings in the current year have
also been adversely impacted
by challenging economic and financial conditions in key geographic areas and market
segments, particularly within certain European regions and the U.S. public sector. |
||
| Within our MSM segment, where we believe performance is best evaluated based on total
and annualized bookings over a trailing twelve months basis, total bookings for the
trailing twelve months ended December 31, 2011 increased by $169.0 million, or 22.2%, and
on an annualized basis, after normalizing for contract length, increased by $27.1 million,
or 10.2%, as compared to the prior year period. |
||
| Total revenue for the quarter was $548.2 million, representing an increase of $8.3
million, or 1.5%, over the prior year quarter, and for the nine months ended December 31,
2011 was $1,607.3 million, representing an increase of $104.2 million, or 6.9%, over the
prior year period. The increase for the quarter was reflective of maintenance and
professional services revenue increases of $13.0 million, or 5.0%, and $4.9 million, or
10.7%, respectively, offset by a license revenue decrease of $9.6 million, or 4.1%. The
increase for the nine months ended December 31, 2011 was reflective of license,
maintenance and professional services revenue increases of $30.3 million, or 4.9%, $41.8
million, or 5.5%, and $32.1 million, or 26.0%, respectively. On a segment basis, total ESM
revenue for the quarter decreased by $2.5 million, or 0.7%, and total MSM revenue
increased by $10.8 million, or 5.3%, as compared to the prior year quarter, and for the
nine months ended December 31, 2011, total ESM revenue increased by $58.0 million, or
6.2%, and total MSM revenue increased by $46.2 million, or 8.1%, over the prior year
period. |
||
| Operating income for the quarter was $161.8 million, representing an increase of $22.4
million, or 16.1%, over the prior year quarter, and for the nine months ended December 31,
2011 was $437.9 million, representing an increase of $46.9 million, or 12.0%, over the
prior year period. Non-GAAP operating income for the quarter was $212.7 million,
representing an increase of $25.2 million, or 13.4%, over the prior year quarter, and for
the nine months ended December 31, 2011 was $599.6 million, representing an increase of
$63.9 million, or 11.9%, over the prior year period. |
||
| Net earnings for the quarter were $119.9 million, representing an increase of $10.8
million, or 9.9%, over the prior year quarter, and for the nine months ended December 31,
2011 were $330.3 million, representing a decrease of $3.4 million, or 1.0%, from the prior
year period. The decrease for the nine months ended December 31, 2011 was due to discrete
tax benefits recorded by us in the prior year period in connection with tax authority
settlements. Non-GAAP net earnings for the quarter were $156.9 million, representing an
increase of $13.7 million, or 9.6%, over the prior year quarter, and for the nine months
ended December 31, 2011 were $439.6 million, representing an increase of $34.7 million, or
8.6%, over the prior year period. |
20
Table of Contents
| Diluted earnings per share for the quarter was $0.71, representing an increase of
$0.11 per share, or 18.3%, over the prior year quarter, and for the nine months ended
December 31, 2011 was $1.88, representing an increase of $0.05 per share, or 2.7%, over
the prior year period. Non-GAAP diluted earnings per share was $0.93, representing an
increase of $0.14 per share, or 17.7%, over the prior year
quarter, and for the nine months ended December 31, 2011 was $2.51, representing an increase
of $0.29 per share, or 13.1%, over the prior year period. |
||
| Cash flows from operations for the nine months ended December 31, 2011 were $587.4
million, representing an increase of $112.6 million, or 23.7%, over the prior year period.
We closed out the quarter with a strong balance sheet at December 31, 2011, including
$1.4 billion in cash, cash equivalents and investments and $1.9 billion in deferred
revenue. |
We continue to invest in our technology leadership, including in the areas of cloud
computing and software-as-a-service (SaaS). In addition to our ongoing product
development efforts, we consummated several strategic acquisitions across both our ESM
and MSM segments during the nine months ended December 31, 2011. In our ESM segment, we
acquired Coradiant Inc., Aeroprise, Inc. and StreamStep, Inc. In our MSM segment, we
completed the purchase of Neon Enterprise Software, LLCs IMS software portfolio and I/O
Concepts Software Corporation. Additionally, in January 2012, we also
announced our pending acquisition of Numara Software Holdings, Inc.,
a leader in service management solutions for mid-market companies.
This acquisition within our ESM segment complements our on-premise
and SaaS offerings, expanding our IT management solutions to small
and mid-market businesses.
We also continue to enhance shareholder value by returning cash to shareholders
through our stock repurchase program. During the quarter and nine months ended December
31, 2011, we repurchased 6.3 million and 15.1 million shares, respectively, for a total
value of $225.0 million and $630.5 million, respectively. In October 2011, our Board of
Directors authorized an additional $1.0 billion to repurchase stock.
Our earnings are subject to volatility as a significant portion of our operating
expenses is fixed in the short-term and we plan a portion of our expense run-rate based
on our expectations of future revenue. In addition, a significant amount of our license
transactions are completed during the final weeks and days of each quarter and,
therefore, we generally do not know whether revenue has met our expectations until after
the end of the quarter. If a shortfall in revenue were to occur in any given quarter,
there would be an immediate, and possibly significant, impact to our overall earnings
and, most likely, our stock price.
Because our software solutions are designed for and marketed to companies looking to
improve the management of their IT infrastructure and processes, demand for our products,
and therefore our financial results, are dependent upon customers continuing to value
such solutions and to invest in such technology. There are a number of trends that have
historically influenced demand for IT management software, including, among others,
business demands placed on IT, computing capacity within IT departments, complexity of IT
systems and IT operational costs. Our financial results are also influenced by many
economic and industry conditions, including, but not limited to, general economic and
market conditions in the United States and other economies in which we market products,
changes in foreign currency exchange rates, general levels of customer spending, IT
budgets, the competitiveness of the IT management software and solutions industry, the
adoption rate for Business Service Management and the stability of the mainframe market.
21
Table of Contents
Results of Operations and Financial Condition
The following table sets forth, for the periods indicated, the percentages that
selected items in the condensed consolidated statements of operations and comprehensive
income represent of total revenue. These financial results are not necessarily indicative
of future results.
Percentage of Total Revenue | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
License |
41.0 | % | 43.5 | % | 40.1 | % | 40.9 | % | ||||||||
Maintenance |
49.7 | % | 48.0 | % | 50.2 | % | 50.9 | % | ||||||||
Professional services |
9.3 | % | 8.5 | % | 9.7 | % | 8.2 | % | ||||||||
Total revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating expenses: |
||||||||||||||||
Cost of license revenue |
7.0 | % | 6.0 | % | 7.2 | % | 6.3 | % | ||||||||
Cost of maintenance revenue |
8.4 | % | 8.1 | % | 8.7 | % | 8.3 | % | ||||||||
Cost of professional services revenue |
9.6 | % | 10.1 | % | 9.5 | % | 8.8 | % | ||||||||
Selling and marketing expenses |
28.1 | % | 29.7 | % | 28.1 | % | 29.6 | % | ||||||||
Research and development expenses |
7.0 | % | 8.3 | % | 7.6 | % | 8.4 | % | ||||||||
General and administrative expenses |
9.2 | % | 10.4 | % | 10.0 | % | 10.8 | % | ||||||||
Amortization of intangible assets |
1.1 | % | 1.6 | % | 1.6 | % | 1.7 | % | ||||||||
Total operating expenses |
70.5 | % | 74.2 | % | 72.8 | % | 74.0 | % | ||||||||
Operating income |
29.5 | % | 25.8 | % | 27.2 | % | 26.0 | % | ||||||||
Other income (loss), net |
(0.6 | )% | 0.3 | % | (0.6 | )% | (0.2 | )% | ||||||||
Earnings before income taxes |
28.9 | % | 26.1 | % | 26.6 | % | 25.8 | % | ||||||||
Provision for income taxes |
7.0 | % | 5.9 | % | 6.1 | % | 3.6 | % | ||||||||
Net earnings |
21.9 | % | 20.2 | % | 20.5 | % | 22.2 | % |
22
Table of Contents
Revenue
The following table provides information regarding software license and software
maintenance revenue for the quarters and nine months ended December 31, 2011 and 2010:
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
Software License Revenue | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||
Enterprise Service Management |
$ | 133.7 | $ | 148.9 | (10.2 | )% | $ | 398.2 | $ | 393.4 | 1.2 | % | ||||||||||||
Mainframe Service Management |
91.3 | 85.7 | 6.5 | % | 246.0 | 220.5 | 11.6 | % | ||||||||||||||||
Total software license revenue |
$ | 225.0 | $ | 234.6 | (4.1 | )% | $ | 644.2 | $ | 613.9 | 4.9 | % | ||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
Software Maintenance Revenue | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||
Enterprise Service Management |
$ | 147.7 | $ | 139.9 | 5.6 | % | $ | 434.5 | $ | 413.4 | 5.1 | % | ||||||||||||
Mainframe Service Management |
124.6 | 119.4 | 4.4 | % | 372.9 | 352.2 | 5.9 | % | ||||||||||||||||
Total software maintenance revenue |
$ | 272.3 | $ | 259.3 | 5.0 | % | $ | 807.4 | $ | 765.6 | 5.5 | % | ||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
Total Software Revenue | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||
Enterprise Service Management |
$ | 281.4 | $ | 288.8 | (2.6 | )% | $ | 832.7 | $ | 806.8 | 3.2 | % | ||||||||||||
Mainframe Service Management |
215.9 | 205.1 | 5.3 | % | 618.9 | 572.7 | 8.1 | % | ||||||||||||||||
Total software revenue |
$ | 497.3 | $ | 493.9 | 0.7 | % | $ | 1,451.6 | $ | 1,379.5 | 5.2 | % | ||||||||||||
Software License Revenue
License revenue for the quarter ended December 31, 2011 was $225.0 million, a decrease of
$9.6 million, or 4.1%, from the prior year quarter. This decrease was attributable to a
decrease in our ESM segment license revenue, offset by an increase in our MSM segment license
revenue, as further discussed below. Recognition of license revenue that was deferred in prior
periods decreased S4.6 million for the quarter ended December 31, 2011 as compared to the prior
year quarter. Of the license revenue transactions recorded, the percentage of license revenue
recognized upfront was 55% in the current quarter as compared to 46% in the prior year quarter.
License revenue for the nine months ended December 31, 2011 was $644.2 million, an
increase of $30.3 million, or 4.9%, over the prior year period. This increase was attributable
to increases in our ESM and MSM segment license revenues, as further discussed below.
Recognition of license revenue that was deferred in prior periods increased $16.2 million for
the nine months ended December 31, 2011 as compared to the prior year period. Of the license
revenue transactions recorded, the percentage of license revenue recognized upfront was 54% in
the current period as compared to 50% in the prior year period.
ESM license revenue was $133.7 million, or 59.4%, and $398.2 million, or 61.8%, of our
total license revenue for the quarter and nine months ended December 31, 2011, respectively,
and $148.9 million, or 63.5%, and $393.4 million, or 64.1%, of our total license revenue for
the quarter and nine months ended December 31, 2010, respectively. ESM license revenue for the
quarter ended December 31, 2011 decreased by $15.2 million, or 10.2%, from the prior year
quarter, primarily due to a $10.8 million decrease in the recognition of previously
deferred license revenue and a $4.4 million reduction in upfront license
revenue recognized in connection with new transactions. The decrease in upfront
license revenue recognized in the quarter ended December 31, 2011 was attributable to
a decrease in license bookings, partially offset by a higher percentage of such bookings that
were recognized as revenue upfront rather than ratably over the underlying contractual
maintenance terms. ESM license revenue for the nine months ended December 31, 2011
increased by $4.8 million, or 1.2%, over the prior year period,
primarily due to an $8.3 million increase in the amount of upfront license revenue recognized in connection with
new transactions, offset by a $3.5 million decrease in the recognition of
previously deferred license revenue. The increase in upfront license revenue recognized in
the nine months ended December 31, 2011 was attributable to a higher percentage of license
bookings that were recognized as revenue upfront rather than ratably over the underlying
contractual maintenance terms, partially offset by a decrease in license bookings.
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Table of Contents
MSM license revenue was $91.3 million, or 40.6%, and $246.0 million, or 38.2%, of our
total license revenue for the quarter and nine months ended December 31, 2011, respectively,
and $85.7 million, or 36.5%, and $220.5 million, or 35.9%, of our total license revenue for the
quarter and nine months ended December 31, 2010, respectively. MSM license revenue for the
quarter ended December 31, 2011 increased by $5.6 million, or 6.5%, over the prior year
quarter. This increase was primarily due to a $6.2 million increase in the
recognition of previously deferred license revenue, partially offset by a nominal decrease in
the amount of upfront license revenue recognized in connection with new transactions. MSM
license revenue for the nine months ended December 31, 2011 increased by $25.5 million, or
11.6%, over the prior year period. This increase was primarily due to
a $19.7 million increase in the recognition of previously deferred
license revenue and a $5.8 million increase in the amount of upfront license revenue recognized in connection with
new transactions. The increase in upfront license revenue recognized in the nine months
ended December 31, 2011 was attributable to an increase in license bookings, partially offset
by a lower percentage of license bookings that were recognized as revenue upfront rather than
ratably over the underlying contractual maintenance terms.
Deferred License Revenue
For the quarters and nine months ended December 31, 2011 and 2010, our recognized
license revenue was impacted by the changes in our deferred license revenue balance as
follows:
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Deferrals of license revenue |
$ | 107.6 | $ | 160.1 | $ | 281.6 | $ | 326.1 | ||||||||
Recognition from deferred license revenue |
(95.8 | ) | (100.4 | ) | (307.0 | ) | (290.8 | ) | ||||||||
Impact of foreign currency exchange rate changes |
| 0.8 | (2.0 | ) | 1.8 | |||||||||||
Net increase (decrease) in deferred license revenue |
$ | 11.8 | $ | 60.5 | $ | (27.4 | ) | $ | 37.1 | |||||||
Deferred license revenue balance at end of period |
$ | 658.7 | $ | 661.3 | $ | 658.7 | $ | 661.3 |
The primary reasons for license revenue deferrals include, but are not limited to,
customer transactions that include products for which the maintenance pricing is based on
a combination of undiscounted license list prices, net license fees or discounted license
list prices, certain arrangements that include unlimited licensing rights, time-based
licenses that are recognized over the term of the arrangement, customer transactions that
include products with differing maintenance periods and other transactions for which we
do not have or are not able to determine vendor-specific objective evidence of the fair
value of the maintenance and/or professional services. The contract terms and conditions
that result in deferral of revenue recognition for a given transaction result from arms
length negotiations between us and our customers. We anticipate our transactions will
continue to include such contract terms that result in deferral of the related license
revenue as we expand our offerings to meet customers product, pricing and licensing
needs.
Once it is determined that license revenue for a particular contract must be
deferred, based on the contractual terms and application of revenue recognition policies
to those terms, we recognize such license revenue either ratably over the term of the
contract or when the revenue recognition criteria are met. Because of this, we generally
know the timing of the subsequent recognition of license revenue at the time of deferral.
Therefore, the amount of license revenue to be recognized from the deferred revenue
balance in each future quarter is generally predictable. At December 31, 2011, the
deferred license revenue balance was $658.7 million. Estimated future recognition from
deferred license revenue at December 31, 2011 is (in millions):
Remainder of fiscal 2012 |
$ | 96.9 | ||
Fiscal 2013 |
280.0 | |||
Fiscal 2014 and thereafter |
281.8 | |||
$ | 658.7 | |||
Software Maintenance Revenue
Maintenance revenue for the quarter ended December 31, 2011 was $272.3 million, an
increase of $13.0 million, or 5.0%, over the prior year quarter, due to increases in both
ESM and MSM maintenance revenue, as discussed below. Maintenance revenue for the nine
months ended December 31, 2011 was $807.4 million, an increase of $41.8 million, or 5.5%,
over the prior year period, due to increases in both ESM and MSM maintenance revenue, as
discussed below.
ESM maintenance revenue was $147.7 million, or 54.2%, and $434.5 million, or 53.8%,
of our total maintenance revenue for the quarter and nine months ended December 31,
2011, respectively, and $139.9 million, or 54.0%, and $413.4 million, or 54.0%, of our
total maintenance revenue for the quarter and nine months ended December 31, 2010,
respectively. ESM maintenance revenue for the quarter ended December 31, 2011 increased
by $7.8 million, or 5.6%, over the prior year quarter. ESM maintenance revenue for the
nine months ended December 31, 2011 increased by $21.1 million, or 5.1%, over the prior
year period. These increases were attributable primarily to an expanded installed ESM
customer license base.
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Table of Contents
MSM maintenance revenue was $124.6 million, or 45.8%, and $372.9 million, or 46.2%, of
our total maintenance revenue for the quarter and nine months ended December 31, 2011,
respectively, and $119.4 million, or 46.0%, and $352.2 million, or 46.0%, of our total
maintenance revenue for the quarter and nine months ended December 31, 2010,
respectively. MSM maintenance revenue for the quarter ended December 31, 2011 increased
by $5.2 million, or 4.4%, over the prior year quarter. MSM maintenance revenue for the
nine months ended December 31, 2011 increased by $20.7 million, or 5.9%, over the prior
year period. These increases were attributable primarily to the expansion of our
installed MSM customer license base and increased capacities of the current installed
base.
Deferred Maintenance Revenue
At December 31, 2011, the deferred maintenance revenue balance was $1.2 billion.
Estimated future recognition from deferred maintenance revenue at December 31, 2011 is
(in millions):
Remainder of fiscal 2012 |
$ | 202.9 | ||
Fiscal 2013 |
532.4 | |||
Fiscal 2014 and thereafter |
440.2 | |||
$ | 1,175.5 | |||
Domestic vs. International Revenue
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||
License: |
||||||||||||||||||||||||
Domestic |
$ | 107.4 | $ | 105.8 | 1.5 | % | $ | 314.9 | $ | 291.3 | 8.1 | % | ||||||||||||
International |
117.6 | 128.8 | (8.7 | )% | 329.3 | 322.6 | 2.1 | % | ||||||||||||||||
Total license revenue |
225.0 | 234.6 | (4.1 | )% | 644.2 | 613.9 | 4.9 | % | ||||||||||||||||
Maintenance: |
||||||||||||||||||||||||
Domestic |
144.6 | 139.3 | 3.8 | % | 432.5 | 416.6 | 3.8 | % | ||||||||||||||||
International |
127.7 | 120.0 | 6.4 | % | 374.9 | 349.0 | 7.4 | % | ||||||||||||||||
Total maintenance revenue |
272.3 | 259.3 | 5.0 | % | 807.4 | 765.6 | 5.5 | % | ||||||||||||||||
Professional services: |
||||||||||||||||||||||||
Domestic |
25.7 | 20.5 | 25.4 | % | 77.1 | 58.4 | 32.0 | % | ||||||||||||||||
International |
25.2 | 25.5 | (1.2 | )% | 78.6 | 65.2 | 20.6 | % | ||||||||||||||||
Total professional services revenue |
50.9 | 46.0 | 10.7 | % | 155.7 | 123.6 | 26.0 | % | ||||||||||||||||
Total domestic revenue |
277.7 | 265.6 | 4.6 | % | 824.5 | 766.3 | 7.6 | % | ||||||||||||||||
Total international revenue |
270.5 | 274.3 | (1.4 | )% | 782.8 | 736.8 | 6.2 | % | ||||||||||||||||
Total revenue |
$ | 548.2 | $ | 539.9 | 1.5 | % | $ | 1,607.3 | $ | 1,503.1 | 6.9 | % | ||||||||||||
We estimate that the effect of foreign currency exchange rate fluctuations on our
international revenue resulted in an approximate $1 million decrease in revenue for the
quarter ended December 31, 2011, and an approximate $14 million increase in revenue for
the nine months ended December 31, 2011, respectively, as compared to the respective
prior year periods, on a constant currency basis.
Domestic License Revenue
Domestic license revenue was $107.4 million, or 47.7%, and $314.9 million, or 48.9%,
of our total license revenue for the quarter and nine months ended December 31, 2011,
respectively, and $105.8 million, or 45.1%, and $291.3 million, or 47.5%, of our total
license revenue for the quarter and nine months ended December 31, 2010, respectively.
Domestic license revenue for the quarter ended December 31, 2011 increased by $1.6
million, or 1.5%, over the prior year quarter, due to a $1.9 million increase in ESM
license revenue, offset by a $0.3 million decrease in MSM license revenue. Domestic
license revenue for the nine months ended December 31, 2011 increased by $23.6 million,
or 8.1%, over the prior year period, due to a $13.6 million increase in ESM license
revenue and a $10.0 million increase in MSM license revenue.
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International License Revenue
International license revenue was $117.6 million, or 52.3%, and $329.3 million, or
51.1%, of our total license revenue for the quarter and nine months ended December 31,
2011, respectively, and $128.8 million or 54.9%, and $322.6 million, or 52.5%, of our
total license revenue for the quarter and nine months ended December 31, 2010,
respectively.
International license revenue for the quarter ended December 31, 2011 decreased by
$11.2 million, or 8.7%, from the prior year quarter, due to a $17.1 million decrease in
ESM license revenue, offset by a $5.9 million increase in MSM license revenue. The ESM
license revenue decrease was attributable primarily to decreases of $11.9 million and
$4.6 million in our Europe, Middle East and Africa (EMEA) and Asia Pacific markets,
respectively. The MSM license revenue increase was attributable primarily to increases of
$4.0 million and $2.3 million in our Latin America and Canada markets, respectively.
International license revenue for the nine months ended December 31, 2011 increased
by $6.7 million, or 2.1%, over the prior year period, due to a $15.6 million increase in
MSM license revenue, offset by an $8.9 million decrease in ESM license revenue. The MSM
license revenue increase was attributable to increases of $10.4 million, $9.9 million and
$1.7 million in our Latin America, EMEA and Asia Pacific markets, respectively, offset by
a $6.4 million decrease in our Canada market. The ESM license revenue decrease was
attributable to decreases of $15.7 million and $2.8 million in our EMEA and Latin America
markets, respectively, offset by increases of $6.3 million and $3.3 million in our Asia
Pacific and Canada markets, respectively.
Domestic Maintenance Revenue
Domestic maintenance revenue was $144.6 million, or 53.1%, and $432.5 million, or
53.6%, of our total maintenance revenue for the quarter and nine months ended December
31, 2011, respectively, and $139.3 million, or 53.7%, and $416.6 million, or 54.4%, of
our total maintenance revenue for the quarter and nine months ended December 31, 2010,
respectively. Domestic maintenance revenue for the quarter ended December 31, 2011
increased by $5.3 million, or 3.8%, over the prior year quarter, due to a $3.5 million
increase in ESM maintenance revenue and a $1.8 million increase in MSM maintenance
revenue. Domestic maintenance revenue for the nine months ended December 31, 2011
increased by $15.9 million, or 3.8%, over the prior year period, due to an $11.5 million
increase in ESM maintenance revenue and a $4.4 million increase in MSM maintenance
revenue.
International Maintenance Revenue
International maintenance revenue was $127.7 million, or 46.9%, and $374.9 million,
or 46.4%, of our total maintenance revenue for the quarter and nine months ended December
31, 2011, respectively, and $120.0 million, or 46.3%, and $349.0 million, or 45.6%, of
our total maintenance revenue for the quarter and nine months ended December 31, 2010,
respectively.
International maintenance revenue for the quarter ended December 31, 2011 increased
by $7.7 million, or 6.4%, over the prior year quarter, due to a $4.2 million increase in
ESM maintenance revenue and a $3.5 million increase in MSM maintenance
revenue. The ESM maintenance revenue increase was attributable primarily to
increases of $2.8 million and $1.4 million in our EMEA and Asia Pacific markets. The MSM
maintenance revenue increase was attributable primarily to increases of $2.4 million and
$1.2 million in our Latin America and EMEA markets, respectively.
International maintenance revenue for the nine months ended December 31, 2011
increased by $25.9 million, or 7.4%, over the prior year period, due to a $9.6 million
increase in ESM maintenance revenue and a $16.3 million increase in MSM maintenance
revenue. The ESM maintenance revenue increase was attributable to increases of $4.6
million and $3.2 million in our Asia Pacific and EMEA markets, respectively, and a
combined net increase of $1.8 million in our other international markets. The MSM
maintenance revenue increase was attributable to increases of $7.9 million and $6.2
million in our Latin America and EMEA markets, respectively, and a combined net increase
of $2.2 million in our other international markets.
Professional Services Revenue
Professional services revenue for the quarter ended December 31, 2011 increased by
$4.9 million, or 10.7%, over the prior year quarter, which is reflective of a $5.2
million, or 25.4%, increase in domestic professional services revenue, offset by a $0.3
million, or 1.2%, decrease in international professional services revenue. Professional
services revenue for the nine months ended December 31, 2011 increased by $32.1 million,
or 26.0%, over the prior year period, which is reflective of an $18.7 million, or 32.0%,
increase in domestic professional services revenue and a $13.4 million, or 20.6%,
increase in international professional services revenue. These increases were
attributable primarily to increases in implementation, consulting and education services
revenue period over period, including increased demand for cloud implementations.
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Operating Expenses
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||
Cost of license revenue |
$ | 38.6 | $ | 32.5 | 18.8 | % | $ | 116.2 | $ | 95.2 | 22.1 | % | ||||||||||||
Cost of maintenance revenue |
46.2 | 43.7 | 5.7 | % | 139.5 | 124.3 | 12.2 | % | ||||||||||||||||
Cost of professional services revenue |
52.8 | 54.7 | (3.5 | )% | 153.4 | 132.0 | 16.2 | % | ||||||||||||||||
Selling and marketing expenses |
154.1 | 160.2 | (3.8 | )% | 452.3 | 445.5 | 1.5 | % | ||||||||||||||||
Research and development expenses |
38.5 | 45.0 | (14.4 | )% | 121.5 | 126.9 | (4.3 | )% | ||||||||||||||||
General and administrative expenses |
50.4 | 56.0 | (10.0 | )% | 160.0 | 163.0 | (1.8 | )% | ||||||||||||||||
Amortization of intangible assets |
5.8 | 8.4 | (31.0 | )% | 26.5 | 25.2 | 5.2 | % | ||||||||||||||||
Total operating expenses |
$ | 386.4 | $ | 400.5 | (3.5 | )% | $ | 1,169.4 | $ | 1,112.1 | 5.2 | % | ||||||||||||
We estimate that the effect of foreign currency exchange rate fluctuations on our
international operating expenses resulted in an approximate $2 million reduction and an
approximate $19 million increase in operating expenses for the quarter and nine months
ended December 31, 2011, respectively, as compared to the prior year periods, on a
constant currency basis.
Cost of License Revenue
Cost of license revenue consists primarily of the amortization of capitalized
software costs for internally developed products, the amortization of acquired technology
for products acquired through business combinations, license-based royalties to third
parties and production and distribution costs for initial product licenses. For the
quarter and nine months ended December 31, 2011, cost of license revenue was $38.6
million, or 7.0%, and $116.2 million, or 7.2%, of total revenue, respectively, and 17.2%
and 18.0% of license revenue, respectively. For the quarter and nine months ended
December 31, 2010, cost of license revenue was $32.5 million, or 6.0%, and $95.2 million,
or 6.3%, of total revenue, respectively, and 13.9% and 15.5% of license revenue,
respectively.
Cost of license revenue for the quarter ended December 31, 2011 increased by $6.1
million, or 18.8%, over the prior year quarter. This increase was attributable primarily
to a $3.8 million increase in the amortization of capitalized software development costs
and a $2.8 million increase in the amortization of acquired technology.
Cost of license revenue for the nine months ended December 31, 2011 increased by
$21.0 million, or 22.1%, over the prior year period. This increase was attributable
primarily to a $15.5 million increase in the amortization of capitalized software
development costs and a $5.7 million increase in the amortization of acquired technology.
Cost of Maintenance Revenue
Cost of maintenance revenue consists primarily of the costs associated with customer
support and research and development personnel that provide maintenance, enhancement and
support services to our customers. For the quarter and nine months ended December 31,
2011, cost of maintenance revenue was $46.2 million, or 8.4%, and $139.5 million, or
8.7%, of total revenue, respectively, and 17.0% and 17.3% of maintenance revenue,
respectively. For the quarter and nine months ended December 31, 2010, cost of
maintenance revenue was $43.7 million, or 8.1%, and $124.3 million, or 8.3%, of total
revenue, respectively, and 16.9% and 16.2% of maintenance revenue, respectively.
Cost of maintenance revenue for the quarter ended December 31, 2011 increased by
$2.5 million, or 5.7%, over the prior year quarter. This increase was attributable to a
$2.5 million increase in third party maintenance outsourcing costs, a $1.2 million
increase in share-based compensation expense and a $1.6 million net increase in other
expenses, offset by a $2.8 million decrease in personnel costs
allocated to maintenance projects.
Cost of maintenance revenue for the nine months ended December 31, 2011 increased by
$15.2 million, or 12.2%, over the prior year period. This increase was attributable to a
$6.4 million increase in third party maintenance outsourcing costs, a $4.0 million
increase in share-based compensation expense, a $1.9 million increase in
maintenance-based royalties to third parties and a $2.9 million net increase in other
expenses.
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Cost of Professional Services Revenue
Cost of professional services revenue consists primarily of salaries, related
personnel costs and third party fees associated with implementation, consulting and
education services that we provide to our customers and the related infrastructure to
support this business. For the quarter and nine months ended December 31, 2011, cost of
professional services revenue was $52.8 million, or 9.6%, and $153.4 million, or 9.5%, of
total revenue, respectively, and 103.7% and 98.5% of professional services revenue,
respectively. For the quarter and nine months ended December 31, 2010, cost of
professional services revenue was $54.7 million, or 10.1%, and $132.0 million, or 8.8%,
of total revenue, respectively, and 118.9% and 106.8% of professional services revenue,
respectively.
Cost of professional services revenue for the quarter ended December 31, 2011
decreased by $1.9 million, or 3.5%, from the prior year quarter. This decrease was
attributable primarily to a $6.6 million decrease in third party subcontracting fees
offset by a $5.1 million increase in personnel and related costs.
Cost of professional services revenue for the nine months ended December 31, 2011
increased by $21.4 million, or 16.2%, over the prior year period. This increase was
attributable primarily to a $15.2 million increase in personnel and related costs and a
$5.3 million increase in third party subcontracting fees.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of salaries, related personnel
costs, sales commissions and costs associated with advertising, marketing, industry trade
shows and sales seminars. For the quarter and nine months ended December 31, 2011,
selling and marketing expenses were $154.1 million, or 28.1%, and $452.3 million, or
28.1%, of total revenue, respectively. For the quarter and nine months ended December 31,
2010, selling and marketing expenses were $160.2 million, or 29.7%, and $445.5 million,
or 29.6%, of total revenue, respectively.
Selling and marketing expenses for the quarter ended December 31, 2011 decreased by
$6.1 million, or 3.8%, from the prior year quarter. This decrease was primarily
attributable to a net decrease in personnel and related costs of $1.5 million
(principally due to a decrease in variable compensation expense of
$4.4 million as a result of decreased
license revenue, offset by an increase
in wages of $3.6 million due to an increase in sales personnel
headcount), a $2.7 million decrease in legal costs relating to a fiscal 2011 matter
and a $1.9 million net decrease in other expenses.
Selling and marketing expenses for the nine months ended December 31, 2011 increased
by $6.8 million, or 1.5%, over the prior year period. This increase was attributable to a
$6.8 million increase in sales personnel and related costs, principally due to
an increase in sales personnel headcount, and a $2.7 million increase in share-based
compensation expense, offset by a $2.7 million decrease in legal
costs relating to a
fiscal 2011 matter.
Research and Development Expenses
Research and development expenses consist primarily of salaries and personnel costs
(including third party subcontracting fees) related to software developers and
development support personnel, including product management, software programmers,
testing and quality assurance personnel and writers of technical documentation, such as
product manuals and installation guides. These expenses also include computer hardware
and software costs, telecommunications costs and personnel costs associated with our
development and production labs. For the quarter and nine months ended December 31, 2011,
research and development expenses were $38.5 million, or 7.0%, and $121.5 million, or
7.6%, of total revenue, respectively. For the quarter and nine months ended December 31,
2010, research and development expenses were $45.0 million, or 8.3%, and $126.9 million,
or 8.4%, of total revenue, respectively.
Research and development expenses for the quarter ended December 31, 2011 decreased
by $6.5 million, or 14.4%, from the prior year quarter. This decrease was attributable
primarily to a $6.1 million increase in capitalized research and development costs
related to software development projects, due to the scope and timing of several key
future product releases.
Research and development expenses for the nine months ended December 31, 2011
decreased by $5.4 million, or 4.3%, from the prior year period. This decrease reflects a
$5.5 million increase in personnel and related costs and a $2.5 million increase in
share-based compensation expense, offset by a $12.1 million increase in capitalized
research and development costs related to software development
projects, due to the scope
and timing of several key future product releases, and a $1.3 million net decrease in
other expenses.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
personnel costs of executive management, finance and accounting, facilities management,
legal and human resources. Other costs included in general and administrative expenses
include fees paid for outside accounting and legal services, consulting projects and
insurance. For the quarter and nine months ended December 31, 2011, general and
administrative expenses were $50.4 million, or 9.2%, and $160.0 million, or 10.0%, of
total revenue, respectively. For the quarter and nine months ended December 31, 2010,
general and administrative expenses were $56.0 million, or 10.4%, and $163.0 million, or
10.8%, of total revenue, respectively.
General and administrative expenses for the quarter ended December 31, 2011
decreased by $5.6 million, or 10.0%, from the prior year quarter. This decrease was
attributable primarily to a $7.1 million decrease in personnel
costs, principally due to a decrease in variable compensation expense, and a $1.4 million
decrease in facilities expenses, offset by a $2.4 million increase in share-based
compensation expense.
General and administrative expenses for the nine months ended December 31, 2011
decreased by $3.0 million, or 1.8%, from the prior year period. This decrease was
attributable to a $9.3 million decrease in personnel costs, principally due to a decrease in variable compensation expense, and a $2.9 million decrease in
facilities expenses, offset by a $5.8 million increase in share-based compensation
expense and a $3.4 million net increase in other expenses.
Amortization of Intangible Assets
Amortization of intangible assets consists of the amortization of customer
relationships and other intangible assets recorded in connection with our business
combinations. For the quarter and nine months ended December 31, 2011, amortization of
intangible assets was $5.8 million and $26.5 million, respectively. For the quarter and
nine months ended December 31, 2010, amortization of intangible assets was $8.4 million
and $25.2 million, respectively.
Amortization of intangible assets for the quarter ended December 31, 2011 decreased
by $2.6 million, or 31.0%, from the prior year quarter. This decrease was attributable
primarily to a current quarter accounting correction related to the foreign currency impacts of
certain intangible assets associated with a fiscal 2000 business combination, which had
the effect of decreasing intangible asset amortization expense by $4.5 million in the
quarter. The remaining variance is attributable to amortization associated with
intangible assets acquired in connection with our fiscal 2011 and 2012 acquisitions,
partially offset by a reduction in amortization associated with intangible assets
acquired in connection with past acquisitions that became fully amortized.
Amortization of intangible assets for the nine months ended December 31, 2011
increased by $1.3 million, or 5.2%, over the prior year period. This increase was
attributable primarily to amortization associated with intangible assets acquired in
connection with our fiscal 2011 and 2012 acquisitions, partially offset by a reduction in
amortization associated with intangible assets acquired in connection with past
acquisitions that became fully amortized. Additionally, the
accounting correction recorded in the current quarter, as noted
above, had the effect of decreasing intangible
asset amortization expense by $4.5 million for the nine months ended December 31, 2011.
Other Income (Loss), Net
Other income (loss), net, consists primarily of interest earned, realized gains and
losses on investments and interest expense on our senior unsecured notes due 2018 and
capital leases. Other income (loss), net, for the quarter and nine months ended December
31, 2011, was a loss of $3.5 million and $9.9 million, respectively. Other income (loss),
net, for the quarter and nine months ended December 31, 2010, was income of $1.7 million
and a loss of $3.5 million, respectively.
The change in other income (loss), net for the quarter ended December 31, 2011 was
attributable primarily to a $3.4 million reduction in net gains on investments and a $1.2
million reduction in foreign currency gains from the prior year quarter.
The change in other income (loss), net for the nine months ended December 31, 2011
was attributable primarily to a $5.7 million reduction in net gains on investments.
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Income Taxes
Income tax expense was $38.4 million and $97.7 million for the quarter and nine
months ended December 31, 2011, respectively, resulting in effective tax rates of 24.3%
and 22.8%, respectively. Income tax expense was $32.0 million and $53.8 million for the
quarter and nine months ended December 31, 2010, respectively, resulting in effective tax
rates of 22.7% and 13.9%, respectively. Our effective tax rate generally differs from the
U.S. federal statutory rate of 35% due to favorable tax rates associated with earnings
from lower tax rate jurisdictions throughout the world and our policy of indefinitely
reinvesting earnings from certain jurisdictions (primarily in Europe), as well as due to
additional accruals, changes in estimates, releases and settlements with taxing
authorities related to our uncertain tax positions and benefits associated with income
attributable to both domestic production activities and the extraterritorial income
exclusion. During the quarter and nine months ended December 31, 2011, the overall
favorable effects of foreign tax rates on our effective tax rate were 7.3% and 8.6% of
pre-tax earnings, respectively. During the quarter and nine months ended December 31,
2010, the overall favorable effects of foreign tax rates on our effective tax rate were
10.9% and 11.7% of pre-tax earnings, respectively. During the nine months ended December
31, 2011 and 2010, we also recorded discrete net tax benefits of $6.2 million and $32.0
million, respectively, associated with tax authority settlements related to prior years
tax matters which favorably impacted our effective tax rate by 1.4% and 8.3% of pre-tax
earnings, respectively. Our effective tax rate could fluctuate on a quarterly basis and
could be adversely affected to the extent earnings are lower than anticipated in
countries with lower statutory rates and higher than anticipated in countries with higher
statutory rates.
Non-GAAP Financial Measures and Reconciliations
In an effort to provide investors with additional information regarding our results
as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly
earnings press releases and other public disclosures. The primary non-GAAP financial
measures we focus on are: (i) non-GAAP operating income, (ii) non-GAAP net earnings, and
(iii) non-GAAP diluted earnings per share. Each of these financial measures excludes the
impact of certain items and therefore has not been calculated in accordance with GAAP.
These non-GAAP financial measures exclude share-based compensation expense; the
amortization of intangible assets; severance, exit costs and related charges; as well as
the related tax impacts of these items; and certain discrete tax items. Each of the
non-GAAP adjustments is described in more detail below. A reconciliation of each of these
non-GAAP financial measures to its most comparable GAAP financial measure is also
included below.
We believe that these non-GAAP financial measures provide meaningful supplemental
information regarding our operating results because they exclude amounts that BMC
management and the Board of Directors do not consider part of core operating results when
assessing the performance of the organization. In addition, we have historically reported
similar non-GAAP financial measures and we believe that inclusion of these non-GAAP
financial measures provides consistency and comparability with past reports of financial
results. Accordingly, we believe these non-GAAP financial measures are useful to
investors in allowing for greater transparency of supplemental information used by
management.
While we believe that these non-GAAP financial measures provide useful supplemental
information, there are limitations associated with the use of these non-GAAP financial
measures. These non-GAAP financial measures are not prepared in
accordance with GAAP, do not reflect a comprehensive system of accounting and may
not be completely comparable to similarly titled measures of other companies due to
potential differences in the exact method of calculation between companies. Items such as
share-based compensation expense; the amortization of intangible assets; severance, exit
costs and related charges; as well as the related tax impacts of these items; and certain
discrete tax items that are excluded from our non-GAAP financial
measures can have a material impact on net earnings. As a result, these non-GAAP
financial measures should not be considered in isolation from, or as a substitute for,
net earnings, cash flow from operations or other measures of performance prepared in
accordance with GAAP. We compensate for these limitations by using these non-GAAP
financial measures as supplements to GAAP financial measures and by reconciling the
non-GAAP financial measures to their most comparable GAAP financial measure. Investors
are encouraged to review the reconciliations of these non-GAAP financial measures to
their most comparable GAAP financial measures below.
For a detailed explanation of the adjustments made to comparable GAAP financial
measures, the reasons why management uses these measures and the usefulness of these
measures, see items (1) (5) below.
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Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Operating income: |
||||||||||||||||
GAAP operating income |
$ | 161.8 | $ | 139.4 | $ | 437.9 | $ | 391.0 | ||||||||
Share-based compensation expense (1) |
31.1 | 25.3 | 92.7 | 76.3 | ||||||||||||
Amortization of intangible assets (2) |
19.5 | 19.3 | 66.1 | 59.0 | ||||||||||||
Severance, exit costs and related charges (3) |
0.3 | 3.5 | 2.9 | 9.4 | ||||||||||||
Non-GAAP operating income |
$ | 212.7 | $ | 187.5 | $ | 599.6 | $ | 535.7 | ||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Net earnings: |
||||||||||||||||
GAAP net earnings |
$ | 119.9 | $ | 109.1 | $ | 330.3 | $ | 333.7 | ||||||||
Share-based compensation expense (1) |
31.1 | 25.3 | 92.7 | 76.3 | ||||||||||||
Amortization of intangible assets (2) |
19.5 | 19.3 | 66.1 | 59.0 | ||||||||||||
Severance, exit costs and related charges (3) |
0.3 | 3.5 | 2.9 | 9.4 | ||||||||||||
Provision for income taxes on above pre-tax non-GAAP adjustments (4) |
(13.9 | ) | (14.0 | ) | (46.2 | ) | (41.5 | ) | ||||||||
Certain discrete tax items (5) |
| | (6.2 | ) | (32.0 | ) | ||||||||||
Non-GAAP net earnings |
$ | 156.9 | $ | 143.2 | $ | 439.6 | $ | 404.9 | ||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Diluted earnings per share*: |
||||||||||||||||
GAAP diluted earnings per share |
$ | 0.71 | $ | 0.60 | $ | 1.88 | $ | 1.83 | ||||||||
Share-based compensation expense (1) |
0.18 | 0.14 | 0.53 | 0.42 | ||||||||||||
Amortization of intangible assets (2) |
0.12 | 0.11 | 0.38 | 0.32 | ||||||||||||
Severance, exit costs and related charges (3) |
| 0.02 | 0.02 | 0.05 | ||||||||||||
Provision for income taxes on above pre-tax non-GAAP adjustments (4) |
(0.08 | ) | (0.08 | ) | (0.26 | ) | (0.23 | ) | ||||||||
Certain discrete tax items (5) |
| | (0.04 | ) | (0.18 | ) | ||||||||||
Non-GAAP diluted earnings per share* |
$ | 0.93 | $ | 0.79 | $ | 2.51 | $ | 2.22 | ||||||||
* | Non-GAAP diluted earnings per share is computed independently for each
period presented. The sum of GAAP diluted earnings per share and non-GAAP
adjustments per share may not equal non-GAAP diluted earnings per share due to
rounding differences. |
|
(1) | Share-based compensation expense. Our non-GAAP financial measures exclude
the compensation expenses required to be recorded by GAAP for equity awards to
employees and directors. Management and the Board of Directors believe it is
useful in evaluating corporate performance during a particular time period to
review the supplemental non-GAAP financial measures, excluding expenses related
to share-based compensation, because these costs are generally fixed at the
time an award is granted, are then expensed over several years and generally
cannot be changed or influenced by management once granted. |
|
(2) | Amortization of intangible assets. Our non-GAAP financial measures exclude
costs associated with the amortization of intangible assets, which are included
in cost of license revenue and amortization of intangible assets in our
condensed consolidated statements of operations and comprehensive income.
Management and the Board of Directors believe it is useful in evaluating
corporate performance during a particular time period to review the
supplemental non-GAAP financial measures, excluding amortization of intangible
assets, because these costs are fixed at the time of an acquisition, are then
amortized over a period of several years after the acquisition and generally
cannot be changed or influenced by management after the acquisition. |
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(3) | Severance, exit costs and related charges. Our non-GAAP financial measures
exclude severance, exit costs and related charges, and any subsequent changes
in estimates, as they relate to our corporate restructuring activities.
Management and the Board of Directors believe it is useful in evaluating
corporate performance during a particular time period to review the
supplemental non-GAAP financial measures, excluding severance, exit costs and
related charges, in order to provide comparability and consistency with
historical operating results. |
|
(4) | Provision for income taxes on above pre-tax non-GAAP adjustments. Our
non-GAAP financial measures exclude the tax impact of the above pre-tax
non-GAAP adjustments. This amount is calculated using the tax rates of each
country to which these pre-tax non-GAAP adjustments relate. Management excludes
the non-GAAP adjustments on a net-of-tax basis in evaluating our performance.
Therefore, we exclude the tax impact of these charges when presenting non-GAAP
financial measures. |
|
(5) | Certain discrete tax items. Our non-GAAP financial measures exclude net tax
benefits of $6.2 million and $32.0 million for the nine months ended December
31, 2011 and 2010, respectively, associated with tax authority settlements
related to prior years tax matters. Management excludes the impact of these
items in evaluating our performance. Therefore, we exclude these items when
presenting non-GAAP financial measures. |
Liquidity and Capital Resources
At December 31, 2011, we had $1.4 billion in cash, cash equivalents and investments,
approximately 64.2% of which was held by our international subsidiaries and was largely
generated from our international operations. Our international operations have generated
$586.0 million of earnings that we have determined will be invested indefinitely in those
operations. If such earnings were to be repatriated, we would incur a United States
federal income tax liability that is not currently accrued in our financial statements.
We also had outstanding letters of credit, performance bonds and similar instruments at
December 31, 2011 of approximately $31.6 million primarily in support of performance
obligations to various customers, but also related to facilities and other obligations.
At December 31, 2011 and March 31, 2011, we held auction rate securities with a par
value of $29.3 million and $29.8 million, respectively, which were classified as
available-for-sale. The total estimated fair value of our auction rate securities was
$25.9 million and $27.2 million at December 31, 2011 and March 31, 2011, respectively.
Our auction rate securities consist entirely of bonds issued by public agencies that are
backed by student loans with at least a 97% guarantee by the federal government under the
United States Department of Educations Federal Family Education Loan Program. All of
these bonds are currently rated investment grade by Moodys or Standard and Poors.
Auctions for these securities began failing in early 2008 and have continued to fail,
resulting in our continuing to hold such securities and the issuers paying interest at
the maximum contractual rates. We do not believe that any of the underlying issuers of
these auction rate securities are presently at risk of default or that the underlying
credit quality of the assets backing the auction rate security investments has been
impacted by the reduced liquidity of these investments. Due to the illiquidity in the
auction rate securities market caused by failed auctions, we estimated the fair value of
these securities and the put option discussed below using internally developed models of
the expected
cash flows of the securities which incorporate assumptions about the expected cash
flows of the underlying student loans and estimates of the rate of return required by
investors, which includes an adjustment to reflect a lack of liquidity in the market for
these securities. Periodically, the issuers of certain of our auction rate securities
have redeemed portions of our holdings at par value plus accrued interest. During the
quarter and nine months ended December 31, 2011, issuers redeemed available-for-sale
holdings of $0.1 million and $0.5 million, respectively. During the quarter and nine
months ended December 31, 2010, issuers
redeemed available-for-sale holdings of $0.1 million and $11.0 million,
respectively, and trading holdings of $5.4 million during the nine months ended December
31, 2010.
Additionally, in November 2008, we entered into a
put agreement with a bank from which we acquired certain auction rate securities. On July 1, 2010, we exercised our right under this agreement to put the remaining securities subject to this
agreement, with $11.2 million par value, to the bank.
In November 2010, we entered into a credit agreement with certain institutional
lenders providing for an unsecured revolving credit facility in an amount up to $400.0
million which is scheduled to expire on November 30, 2014 (the Credit Facility). Subject
to certain conditions, at any time prior to maturity, we may invite existing and new
lenders to increase the size of the Credit Facility up to a maximum of $600.0 million.
The Credit Facility includes provisions for swing line loans of up to $25.0 million and
standby letters of credit of up to $50.0 million. Revolving loans under the Credit
Facility bear interest, at the Companys option, at a rate equal to either (i) the base
rate (as defined) plus a margin based on the credit ratings of BMCs senior unsecured
notes due 2018 (the Senior Notes), or (ii) the LIBOR rate (as defined) plus a margin
based on the credit ratings of BMCs Senior Notes, for interest periods of one, two,
three or six months. As of December 31, 2011 and through February 1, 2012, we have not
borrowed any funds under the Credit Facility.
We believe that our existing cash and investment balances, funds generated from
operating activities and available credit under the Credit Facility will be sufficient to
meet our working and other capital requirements for the foreseeable future. In the normal
course of business, we evaluate the merits of acquiring technology or businesses, or
establishing strategic relationships with or investing in these businesses. We may elect
to use available cash and investments to fund such activities in the future. In the event
additional needs for cash arise, we might find it advantageous to utilize third party
financing sources based on factors such as our then available cash and its source (i.e.,
cash held in the United States versus international locations), the cost of financing and
our internal cost of capital.
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We may from time to time seek to repurchase or retire securities, including
outstanding borrowings and equity securities, in open market repurchases, unsolicited or
solicited privately negotiated transactions or in such other manner as will comply with
the provisions of the Securities Exchange Act of 1934, as amended (the Exchange Act), and
the rules and regulations thereunder. Such repurchases or exchanges, if any, will depend
on a number of factors, including, but not limited to, prevailing market conditions, our
liquidity requirements and contractual restrictions, if applicable. The amount of
repurchases, which is subject to management discretion, may be material and may change
from period to period.
Our cash flows for the nine months ended December 31, 2011 and 2010 were:
Nine Months Ended | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Net cash provided by operating activities |
$ | 587.4 | $ | 474.8 | ||||
Net cash used in investing activities |
(279.1 | ) | (81.2 | ) | ||||
Net cash used in financing activities |
(627.4 | ) | (226.1 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
(22.3 | ) | 8.0 | |||||
Net change in cash and cash equivalents |
$ | (341.4 | ) | $ | 175.5 | |||
Cash Flows from Operating Activities
Our primary method for funding operations and growth has been through cash flows
generated from operating activities. Net cash provided by operating activities for the
nine months ended December 31, 2011 increased by $112.6 million over the prior year
period, attributable primarily to the net impact of working capital changes.
Cash Flows from Investing Activities
Net cash used in investing activities for the nine months ended December 31, 2011
increased by $197.9 million over the prior year period. This increase was attributable
primarily to an increase in cash expended for our fiscal 2012 acquisitions and a decrease
in net proceeds from the sales and maturities of investments.
Cash Flows from Financing Activities
Net cash used in financing activities for the nine months ended December 31, 2011
increased by $401.3 million over the prior year period. This increase was attributable
primarily to an increase in treasury stock acquired and a decrease in proceeds from stock
options exercised.
Treasury Stock Purchases
Our Board of Directors had previously authorized a total of $4.0 billion to
repurchase common stock. In October 2011, our Board of Directors authorized an additional
$1.0 billion to repurchase stock. During the quarter and nine months ended December 31,
2011, we purchased 6.3 million and 15.1 million shares, respectively, for $225.0 million
and $630.5 million, respectively. From the inception of the stock repurchase
authorization through December 31, 2011, we have purchased 147.9 million shares for $4.0
billion. At December 31, 2011, there was $1.0 billion remaining in the stock repurchase
program, which does not have an expiration date. In addition, during the quarter and nine
months ended December 31, 2011, we repurchased 0.2 million and 0.6 million shares,
respectively, for $8.7 million and $31.7 million, respectively, to satisfy employee tax
withholding obligations upon the vesting of share-based awards.
The repurchase of stock will continue to be funded primarily with cash generated
from domestic operations and, therefore, affects our overall domestic versus
international liquidity balances. See PART II. Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds below for a monthly detail of treasury stock purchases for
the quarter ended December 31, 2011.
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Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses. On an on-going basis, we make and evaluate estimates and judgments,
including those related to revenue recognition, capitalized software development costs,
share-based compensation, goodwill and intangible assets, valuation of investments and
accounting for income taxes. We base our estimates on historical experience and various
other assumptions that we believe are reasonable under the circumstances; the results of
which form the basis for making judgments about amounts and timing of revenue and
expenses, the carrying values of assets and the recorded amounts of liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates
and such estimates may change if the underlying conditions or assumptions change. We have
discussed the development and selection of the critical accounting policies and estimates
with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed
our related disclosures. The critical accounting policies related to the estimates and
judgments are discussed in our Annual Report on Form 10-K for the year ended March 31,
2011 under Managements Discussion and Analysis of Financial Condition and Results of
Operations. There have been no changes to our critical accounting policies and estimates
during the nine months ended December 31, 2011.
Recently Adopted Accounting Pronouncements
In December 2010 and in September 2011, the Financial Accounting Standards Board
(FASB) issued updated guidance relating to the annual goodwill impairment test. This new
guidance incorporates additional qualitative assessments at two discrete points in the
goodwill impairment evaluation. First, entities are now permitted to perform an initial
qualitative assessment of whether it is more likely than not that goodwill is impaired in
order to determine the need to perform the previously required two-step impairment test.
This new guidance has been early adopted by us and will be applied for our fiscal 2012
annual goodwill impairment test. Additionally, as part of step one of the two-step
impairment test, entities are required to perform a qualitative assessment of whether it
is more likely than not that goodwill is impaired in situations where reporting units
have a carrying value that is zero or negative. If the qualitative evaluation determines
that it is more likely than not that goodwill is impaired, step two of the goodwill
impairment test is required to be performed to determine the amount of impairment, if
any. This guidance is effective for us beginning with our fiscal 2012 goodwill
impairment test. Neither set of guidance is expected to have a material effect on our
financial position, results of operations or cash flows.
In October 2009, the FASB issued new revenue recognition guidance for arrangements
that include both software and non-software related deliverables. This guidance requires
entities to allocate the overall consideration to each deliverable by using a best
estimate of the selling price of individual deliverables in the arrangement in the
absence of VSOE or other third party evidence of the selling price. Additionally, the
guidance modifies the manner in which the transaction consideration is allocated across
the separately identified deliverables by no longer permitting the residual method of
allocating arrangement consideration. The new guidance was effective for us in the first
quarter of fiscal 2012 and did not have a material effect on our financial position,
results of operations or cash flows.
New Accounting Pronouncements Not Yet Adopted
In May 2011, the FASB issued updated guidance for fair value measurements, primarily
clarifying existing guidance and adding new disclosure requirements for Level 3 fair
value measurements. This guidance requires entities to disclose quantitative information
about the significant unobservable inputs used in Level 3 measurements, and to provide
additional qualitative information regarding the valuation process in place for Level 3
measurements and the sensitivity of recurring Level 3 fair value measurements to changes
in unobservable inputs used. This new guidance is effective for us beginning with our
fourth quarter of fiscal 2012 and is not expected to have a material effect on our
financial position, results of operations or cash flows.
In December 2011, the FASB issued guidance requiring new disclosures regarding
balance sheet offsetting. This guidance requires entities to disclose the gross amounts
of certain recognized financial assets and liabilities, to reconcile these amounts to the
net positions recognized in the balance sheet and to provide qualitative disclosures
about the rights of offset relating to these financial assets and liabilities. This new
disclosure guidance is effective for us beginning with our first quarter of fiscal 2014.
Available Information
Our internet website address is http://www.bmc.com. Our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are
available through the investor relations page of our internet website free of charge as
soon as reasonably practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission (SEC). Our
internet website and the information contained therein or connected thereto are not
intended to be incorporated into this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to a variety of risks, including foreign currency exchange rate
fluctuations, the impact of changes in interest rates on our investments and long-term
borrowings and changes in market prices of our debt and equity securities. In the normal
course of business, we employ established policies and procedures to manage these risks
including the use of derivative instruments. There have been no material changes in our
foreign currency exchange rate risk management strategy or our portfolio management
strategy subsequent to March 31, 2011; therefore, the risk profile of our market risk
sensitive instruments remains substantially unchanged from the description in our Annual
Report on Form 10-K for the year ended March 31, 2011.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
Based on managements evaluation (with the participation of our Chief Executive
Officer (CEO) and Chief Financial Officer (CFO)), as of the end of the period covered by
this report, our CEO and CFO have concluded that our disclosure controls and procedures
(as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act), are effective.
Changes in Internal Control over Financial Reporting
There was no change to our internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of Rule 13a-15 and Rule 15d-15
under the Exchange Act that occurred during our third fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We previously disclosed the settlement, subject to pending appeals, of a class
action suit involving one of our wholly-owned subsidiaries, Marimba, Inc. Recently, the
sole remaining appeal of the court approved settlement was withdrawn with prejudice such
that this matter is now finally resolved. There was no financial impact to the Company in
connection with this settlement.
Item 1A. Risk Factors
There have been no material changes to the risk factors as presented in our Annual Report
on Form 10-K for the year ended March 31, 2011.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Total Dollar Value | Approximate Dollar | |||||||||||||||||||
Total Number of Shares | of Shares Purchased | Value of Shares that | ||||||||||||||||||
Total Number of | Average Price | Purchased as Part of a | as Part of a | may yet be | ||||||||||||||||
Shares | Paid per | Publicly Announced | Publicly Announced | Purchased Under | ||||||||||||||||
Period | Purchased (1) | Share | Program (2) | Program (2) | the Program (2) | |||||||||||||||
October 1 31, 2011 |
599,214 | $ | 38.25 | 588,453 | $ | 22,506,949 | $ | 1,202,761,352 | ||||||||||||
November 1 30, 2011 |
4,902,126 | $ | 35.58 | 4,888,636 | 173,946,736 | $ | 1,028,814,616 | |||||||||||||
December 1 31, 2011 |
1,056,211 | $ | 34.18 | 835,202 | 28,545,794 | $ | 1,000,268,822 | |||||||||||||
Total |
6,557,551 | $ | 35.64 | 6,312,291 | $ | 224,999,479 | $ | 1,000,268,822 | ||||||||||||
(1) | Includes 245,260 shares of our common stock withheld by us to satisfy employee tax withholding obligations. |
|
(2) | Our Board of Directors had previously authorized a total of $4.0 billion to repurchase common stock. In October
2011, our
Board of Directors authorized an additional $1.0 billion to repurchase stock. At December 31, 2011,
approximately $1.0 billion remains authorized in this stock repurchase program and the program does not have an
expiration date. |
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Item 6. Exhibits
(a) Exhibits.
10.32 | Amendment dated November 1, 2011 to Executive Employment Agreement between BMC
Software, Inc. and Robert E. Beauchamp. |
|||
10.33 | Amendment dated November 10, 2011 to Executive Employment Agreement between BMC Software, Inc.
and Stephen B. Solcher. |
|||
10.34 | Amendment dated November 30, 2011 to Executive Employment Agreement between BMC Software, Inc.
and William D. Miller. |
|||
31.1 | Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|||
31.2 | Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|||
32.1 | Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|||
32.2 | Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|||
101.INS | XBRL Instance Document. |
|||
101.SCH | XBRL Taxonomy Extension Schema Document. |
|||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
|||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
|||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
|||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
BMC SOFTWARE, INC. | ||||||
February 1, 2012
|
By: | /s/ ROBERT E. BEAUCHAMP
Chairman of the Board, President and Chief Executive Officer |
||||
February 1, 2012
|
By: | /s/ STEPHEN B. SOLCHER | ||||
Stephen B. Solcher Senior Vice President and Chief Financial Officer |
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Table of Contents
Exhibits
INDEX
10.32 | Amendment dated November 1, 2011 to Executive Employment Agreement between BMC
Software, Inc. and Robert E. Beauchamp. |
|||
10.33 | Amendment dated November 10, 2011 to Executive Employment Agreement between BMC Software, Inc.
and Stephen B. Solcher. |
|||
10.34 | Amendment dated November 30, 2011 to Executive Employment Agreement between BMC Software, Inc.
and William D. Miller. |
|||
31.1 | Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|||
31.2 | Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(a) of the Securities
Exchange Act of 1934. |
|||
32.1 | Certification of Chief Executive Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|||
32.2 | Certification of Chief Financial Officer of BMC Software,
Inc. pursuant to Section 13a-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350. |
|||
101.INS | XBRL Instance Document. |
|||
101.SCH | XBRL Taxonomy Extension Schema Document. |
|||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
|||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
|||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
|||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
40