e8vk
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C., 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 21, 2004

Progress Software Corporation

(Exact name of registrant as specified in its charter)

Commission file number: 0-19417

     
Massachusetts   04-2746201
(State or other jurisdiction of   (I.R.S. employer
incorporation or organization)   identification no.)

14 Oak Park
Bedford, Massachusetts 01730
(Address of principal executive offices, including zip code)

(781) 280-4000
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 


TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURES
Ex-99.1 Press Release dated December 21, 2004


Table of Contents

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition

On December 21, 2004, Progress Software Corporation issued a press release announcing financial results for its fiscal fourth quarter ended November 30, 2004. A copy of this press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits

     99.1 Press Release dated December 21, 2004

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 hereunto duly authorized.

             
Date: December 21, 2004   Progress Software Corporation
 
           
  By:   /s/ Norman R. Robertson    
     
 
   
      Senior Vice President, Finance and    
          Administration and Chief    
          Financial Officer    

 

exv99w1
 

PROGRESS SOFTWARE REPORTS FOURTH QUARTER RESULTS

Revenue up 17%; Operating Income and EPS up Sharply

BEDFORD, Mass., December 21, 2004 - Progress Software Corporation (PSC) (Nasdaq: PRGS), a leading supplier of technology to develop, deploy, integrate and manage business applications, today announced results for its fourth quarter ended November 30, 2004. Revenue for the quarter was a record $96.2 million, up 17 percent (12 percent at constant currency) from $82.0 million in the fourth quarter of fiscal 2003. Software license revenue increased 23 percent (19 percent at constant currency) to $36.8 million from $29.9 million in the same quarter last year.

On a generally accepted accounting principles (GAAP) basis, operating income increased 29 percent to $15.9 million from $12.3 million in the fourth quarter of fiscal 2003. Net income increased 23 percent to $10.9 million from $8.8 million in the same quarter last year. Diluted earnings per share increased 22 percent to 28 cents from 23 cents in the fourth quarter of fiscal 2003. These results include after-tax charges for amortization of acquired intangibles of $1.3 million in the fourth quarter of fiscal 2004 and $0.4 million in the fourth quarter of fiscal 2003.

On a pro forma basis, excluding the charges for amortization of acquired intangibles, operating income increased 38 percent to $17.7 million from $12.9 million in the fourth quarter of fiscal 2003. Pro forma net income increased 31 percent to $12.1 million from $9.2 million in the same quarter last year. Pro forma diluted earnings per share increased 29 percent to 31 cents from 24 cents in the fourth quarter of fiscal 2003.

For the twelve months ended November 30, 2004, revenue increased 17 percent (11 percent at constant currency) to $363 million from $309 million in fiscal 2003. On a GAAP basis, operating income increased 26 percent to $46.4 million from $36.8 million in fiscal 2003. Net income increased 19 percent to $32.1 million from $27.1 million in fiscal 2003 and diluted earnings per share increased 14 percent to 82 cents from 72 cents in fiscal 2003. The fiscal 2004 results include after-tax charges for amortization of acquired intangibles of $4.8 million and in-process research and development of $1.8 million. The fiscal 2003 results include after-tax charges for amortization of acquired intangibles of $1.6 million and in-process research and development of $0.1 million.

On a pro forma basis, excluding the charges for amortization of acquired intangibles and in-process research and development, operating income increased 43 percent to $56.0 million from $39.2 million in fiscal 2003. Pro forma net income increased 34 percent to $38.7 million from $28.8 million in fiscal 2003. Pro forma diluted earnings per share increased 29 percent to 99 cents from 77 cents in fiscal 2003.

The company’s cash and short-term investments at the end of the quarter totaled $191 million. During the fourth quarter, the company purchased 46,500 shares of its stock at a cost of $0.9 million. The company’s existing repurchase authorization, under which

 


 

approximately 10 million shares remain available for repurchase, expires on September 30, 2005.

“During fiscal 2004, initiatives to broaden the markets we serve and accelerate our growth began to pay off in substantial revenue to PSC,” stated Joseph Alsop, co-founder and chief executive officer of PSC.” Our newer companies, DataDirect, ObjectStore and Sonic Software, now account for 30 percent of our software license revenue. We expect total revenue from these newer companies to continue to grow at double-digit rates in fiscal 2005. At the same time, revenue from our OpenEdge™ product line continues to grow, even after factoring in the impact of favorable foreign exchange rates. The latest release of the OpenEdge platform, OpenEdge 10, is being well received and adopted by Progress customers and Application Partners (APs).”

Highlights

Progress Software Corporation acquired Persistence Software, Inc. (Nasdaq: PRSW), the technology and market leader in distributed data access and caching software, in an all-cash transaction for a purchase price of $5.70 per share or approximately $16 million in the aggregate. The agreement was announced in September and closed on November 5th. Persistence is now part of ObjectStore, an operating company of PSC that provides products for real-time data management. http://www.progress.com/company_info/news_views/pressrelease_364540/pritem.ssp?

A number of new and existing customers purchased Sonic ESB (enterprise service bus) and related suite products as the basis of their enterprise service oriented architecture (SOA). BAA Ltd., the operating authority for seven UK airports, including Heathrow, Gatwick and Stansted, selected Sonic ESB as its SOA infrastructure linking operational systems at Heathrow’s Terminal Five. Sonic also closed significant deals with SAIC, Pacific Capital Bancorp, Lexicon Marketing, Bendit GmbH and Northrop Grumman. http://www.sonicsoftware.com/news_events/pressitem/pressrelease_374849/index.ssp?

ObjectStore announced its RFID Accelerator, an easy-to-use, real-time data management solution for Radio Frequency Identification (RFID) applications. RFID Accelerator delivers a complete RFID application development environment featuring an innovative event query language, persistent database for EPC-related data, support for industry-standard RFID readers to collect RFID data, and open interfaces to communicate RFID events to enterprise applications. The product has already been deployed by DABAC, an independent software vendor serving the forestry industry, to track trees and lumber from Germany’s leading forest products companies through the supply chain to the saw mills. This new RFID application improves inventory management and streamlines the financial reconciliation process.

http://www.progress.com/earnings_q404

 


 

Significant New Customer and Partner Wins, New Technology Adoptions, and Major Deployments

Significant new partners and customers adopting technology from PSC operating companies, or deploying solutions using PSC technology, include: AltaGas Ltd., American Society for Microbiology, Ameriquest Mortgage Company, Aspen Technology, Inc., Boxstar Limited, C&T Solutions SA de CV, Charter Communications, CSX World Terminals Asia Ltd., Dataware Solutions, Denki-Tsushin University, Dictaphone Corp., Dynamic Aviation Group, Inc., Esaote SpA, F.L.Smidth A/S, Fafard & Freres Ltee, Federaal Planbureau, Garradin Pty Ltd., Gibsoft Computer Systems GmbH, Gunns Limited, Hays Mechanical Services, Inc., Immo Kirsch, Imon Technology Co. Ltd., InterActive Taxi, Intesa Sistemi e Servizi SpA, IRP Solutions Corporation, Logilec, NetAge Solutions GmbH, Personec Oy, Politiezone Grensleie, Seremban Specialist Hospital, Summer Institute of Linguist, Symbol Technologies Limited, Techniker Krankenkasse, The Midland News Association, Timken Industrial Services, Trac Medical Solutions, Inc., U.S. Army 18th Airborne Division, Wyoming Department of Education and ZP Sud-Luxembourg.

Significant existing partners and customers adopting technology from different PSC operating companies, or making substantial additional deployments of PSC technology, include: Albertson’s Department Stores , ANZ Bank, Bank of America, Bank One, Barclays Capital, Blue Cross Blue Shield (Florida), Capital One, CCH Incorporated, General Mills, Inc., The Goldman Sachs Group, Inc., Home Mart de Mexico, SA de CV, ING Minneapolis, Kaiser Permanente, Kras Stervakanties, Mansfield Oil Company, Morgan Sindall PLC, Starwood Hotels & Resorts Worldwide, Inc., The Thompson Corporation, Treasury Board of Canada Secretaria, Verizon and WearGuard.

Business Outlook

The company is providing the following guidance for the first fiscal quarter ending February 28, 2005:

  Revenue is expected to be in the range of $94 million to $96 million. GAAP operating income is expected to be in the range of $10 million to $11 million, including amortization of acquired intangibles of $2 million.

  GAAP diluted earnings per share are expected to be in the range of 19 cents to 20 cents.

  On a pro forma basis, operating income is expected to be in the range of $12 million to $13 million, excluding amortization of acquired intangibles of $2 million.

  On a pro forma basis, diluted earnings per share are expected to be in the range of 22 cents to 23 cents, excluding approximately 3 cents per share for amortization of acquired intangibles.

 


 

The company is providing the following guidance for the fiscal year ending November 30, 2005:

  Revenue is expected to be in the range of $390 million to $400 million. GAAP operating income is expected to be in the range of $57 million to $60 million, including amortization of acquired intangibles of $8 million.

  GAAP diluted earnings per share are expected to be in the range of $1.01 to $1.05.

  On a pro forma basis, operating income is expected to be in the range of $65 million to $68 million, excluding amortization of acquired intangibles of $8 million.

  On a pro forma basis, diluted earnings per share are expected to be in the range of $1.14 to $1.18, excluding approximately 13 cents per share for amortization of acquired intangibles.

The above business outlook does not include any expense associated with stock-based compensation. The company is currently evaluating the impact of the new accounting pronouncement regarding stock-based compensation which is effective in the company’s fourth quarter of fiscal 2005.

Legal Notice Regarding Pro Forma Financial Information

The company provides pro forma operating income, net income and earnings per share as additional information for investors. These measures are not in accordance with, or an alternative to, accounting principles generally accepted in the United States (GAAP). Such measures are intended to supplement GAAP and may be different from pro forma measures used by other companies. The company believes that the pro forma results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. Management of the company uses these pro forma results to compare the company’s performance to that of prior periods for analysis of trends, and for budget and planning purposes. A reconciliation of pro forma adjustments to the company’s GAAP financial results is included in the tables below.

Conference Call

PSC’s conference call to discuss its fourth quarter results will be Webcast live today at 9:00 a.m. Eastern via CCBN on the company’s Web site, located at www.progress.com/investors. The call will also be Webcast live via Yahoo (www.yahoo.com), Motley Fool (www.fool.com), Streetevents (www.streetevents.com), TD Waterhouse (www.tdwaterhouse.com) and Fidelity.com (www.fidelity.com). An archived version of the conference call will be available for replay.

About Progress Software Corporation

Progress Software Corporation (Nasdaq: PRGS) is a $300+ million global software industry leader. PSC supplies technologies for all aspects of the development, deployment, integration and management of business applications through its operating

 


 

companies: Progress Software, Sonic Software Corporation, DataDirect Technologies, ObjectStore and PeerDirect. Headquartered in Bedford, Mass., PSC can be reached on the Web at http://www.progress.com or by phone at +1-781-280-4000.

Safe Harbor Statement

Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to the following: the receipt and shipment of new orders, the timely release of enhancements to the company’s products, the growth rates of certain market segments, the positioning of the company’s products in those market segments, variations in the demand for customer service and technical support, pricing pressures and the competitive environment in the software industry, business and consumer use of the Internet, and the company’s ability to penetrate international markets and manage its international operations. The company undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with the company’s business, please refer to the company’s filings with the Securities and Exchange Commission.

 
Progress and OpenEdge are trademarks or registered trademarks of Progress Software Corporation in the U.S. and other countries. Sonic ESB is a registered trademark of Sonic Software Corporation in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.

 


 

Progress Software Corporation
Condensed Consolidated Statements of Income

                         
    Three Months Ended
    November 30,   November 30,   Percent
(In thousands except per share data)
  2004
  2003
  Change
Revenue:
                       
Software licenses
  $ 36,798     $ 29,947       23 %
Maintenance and services
    59,396       52,046       14 %
 
   
 
     
 
         
Total revenue
    96,194       81,993       17 %
 
   
 
     
 
         
Costs and expenses:
                       
Cost of software licenses
    1,990       2,123          
Cost of maintenance and services
    12,743       13,604          
Sales and marketing
    38,581       33,771          
Product development
    15,580       11,891          
General and administrative
    9,566       7,736          
Amortization of purchased intangibles
    1,871       606          
In-process research and development
                   
 
   
 
     
 
         
Total costs and expenses
    80,331       69,731       15 %
 
   
 
     
 
         
Income from operations
    15,863       12,262       29 %
Other income, net
    101       334          
 
   
 
     
 
         
Income before provision for income taxes
    15,964       12,596       27 %
Provision for income taxes
    5,108       3,779          
 
   
 
     
 
         
Net income
  $ 10,856     $ 8,817       23 %
 
   
 
     
 
         
Earnings per share:
                       
Basic
  $ 0.30     $ 0.25       20 %
Diluted
  $ 0.28     $ 0.23       22 %
 
   
 
     
 
         
Weighted average shares outstanding:
                       
Basic
    36,212       35,010       3 %
Diluted
    38,997       38,629       1 %
 
   
 
     
 
         

Pro Forma Condensed Consolidated Statements of Income

                                                         
    Three Months Ended November 30, 2004
  Three Months Ended November 30, 2003
    As   Pro Forma       As   Pro Forma       Percent
(In thousands except per share data)
  Reported
  Adjustments
  Pro Forma
  Reported
  Adjustments
  Pro Forma
  Change
Revenue:
                                                       
Software licenses
  $ 36,798             $ 36,798     $ 29,947             $ 29,947       23 %
Maintenance and services
    59,396               59,396       52,046               52,046       14 %
 
   
 
             
 
     
 
             
 
         
Total revenue
    96,194               96,194       81,993               81,993       17 %
 
   
 
             
 
     
 
             
 
         
Costs and expenses:
                                                       
Cost of software licenses
    1,990               1,990       2,123               2,123          
Cost of maintenance and services
    12,743               12,743       13,604               13,604          
Sales and marketing
    38,581               38,581       33,771               33,771          
Product development
    15,580               15,580       11,891               11,891          
General and administrative
    9,566               9,566       7,736               7,736          
Amortization of purchased intangibles
    1,871     $ (1,871 )           606     $ (606 )              
In-process research and development
                                           
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Total costs and expenses
    80,331       (1,871 )     78,460       69,731       (606 )     69,125       14 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income from operations
    15,863       1,871       17,734       12,262       606       12,868       38 %
Other income, net
    101               101       334               334          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income before provision for income taxes
    15,964       1,871       17,835       12,596       606       13,202       35 %
Provision for income taxes
    5,108       598       5,706       3,779       182       3,961          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Net income
  $ 10,856     $ 1,273     $ 12,129     $ 8,817     $ 424     $ 9,241       31 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Earnings per share:
                                                       
Basic
  $ 0.30             $ 0.33     $ 0.25             $ 0.26       27 %
Diluted
  $ 0.28             $ 0.31     $ 0.23             $ 0.24       29 %
 
   
 
             
 
     
 
             
 
         
Weighted average shares outstanding:
                                                       
Basic
    36,212               36,212       35,010               35,010       3 %
Diluted
    38,997               38,997       38,629               38,629       1 %
 
   
 
             
 
     
 
             
 
         

 


 

Progress Software Corporation
Condensed Consolidated Statements of Income

                         
    Twelve Months Ended
    November 30,   November 30,   Percent
(In thousands except per share data)
  2004
  2003
  Change
Revenue:
                       
Software licenses
  $ 140,462     $ 109,666       28 %
Maintenance and services
    222,200       199,394       11 %
 
   
 
     
 
         
Total revenue
    362,662       309,060       17 %
 
   
 
     
 
         
Costs and expenses:
                       
Cost of software licenses
    8,973       8,435          
Cost of maintenance and services
    52,354       52,599          
Sales and marketing
    146,171       125,650          
Product development
    60,371       50,054          
General and administrative
    38,753       33,080          
Amortization of purchased intangibles
    7,076       2,290          
In-process research and development
    2,600       200          
 
   
 
     
 
         
Total costs and expenses
    316,298       272,308       16 %
 
   
 
     
 
         
Income from operations
    46,364       36,752       26 %
Other income, net
    843       1,925          
 
   
 
     
 
         
Income before provision for income taxes
    47,207       38,677       22 %
Provision for income taxes
    15,106       11,603          
 
   
 
     
 
         
Net income
  $ 32,101     $ 27,074       19 %
 
   
 
     
 
         
Earnings per share:
                       
Basic
  $ 0.89     $ 0.79       13 %
Diluted
  $ 0.82     $ 0.72       14 %
 
   
 
     
 
         
Weighted average shares outstanding:
                       
Basic
    36,031       34,217       5 %
Diluted
    39,010       37,554       4 %
 
   
 
     
 
         

Pro Forma Condensed Consolidated Statements of Income

                                                         
    Twelve Months Ended November 30, 2004
  Twelve Months Ended November 30, 2003
   
    As   Pro Forma       As   Pro Forma       Percent
(In thousands except per share data)
  Reported
  Adjustments
  Pro Forma
  Reported
  Adjustments
  Pro Forma
  Change
Revenue:
                                                       
Software licenses
  $ 140,462             $ 140,462     $ 109,666             $ 109,666       28 %
Maintenance and services
    222,200               222,200       199,394               199,394       11 %
 
   
 
             
 
     
 
             
 
         
Total revenue
    362,662               362,662       309,060               309,060       17 %
 
   
 
             
 
     
 
             
 
         
Costs and expenses:
                                                       
Cost of software licenses
    8,973               8,973       8,435               8,435          
Cost of maintenance and services
    52,354               52,354       52,599               52,599          
Sales and marketing
    146,171               146,171       125,650               125,650          
Product development
    60,371               60,371       50,054               50,054          
General and administrative
    38,753               38,753       33,080               33,080          
Amortization of purchased intangibles
    7,076     $ (7,076 )           2,290     $ (2,290 )              
In-process research and development
    2,600       (2,600 )           200       (200 )              
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Total costs and expenses
    316,298       (9,676 )     306,622       272,308       (2,490 )     269,818       14 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income from operations
    46,364       9,676       56,040       36,752       2,490       39,242       43 %
Other income, net
    843               843       1,925               1,925          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income before provision for income taxes
    47,207       9,676       56,883       38,677       2,490       41,167       38 %
Provision for income taxes
    15,106       3,096       18,202       11,603       747       12,350          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Net income
  $ 32,101     $ 6,580     $ 38,681     $ 27,074     $ 1,743     $ 28,817       34 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Earnings per share:
                                                       
Basic
  $ 0.89             $ 1.07     $ 0.79             $ 0.84       27 %
Diluted
  $ 0.82             $ 0.99     $ 0.72             $ 0.77       29 %
 
   
 
             
 
     
 
             
 
         
Weighted average shares outstanding:
                                                       
Basic
    36,031               36,031       34,217               34,217       5 %
Diluted
    39,010               39,010       37,554               37,554       4 %
 
   
 
             
 
     
 
             
 
         

 


 

Progress Software Corporation
Condensed Consolidated Balance Sheets

                 
    November 30,   November 30,
(In thousands)
  2004
  2003
Assets
               
Cash and short-term investments
  $ 191,267     $ 219,131  
Accounts receivable, net
    63,503       52,065  
Other current assets
    23,513       22,534  
 
   
 
     
 
 
Total current assets
    278,283       293,730  
 
   
 
     
 
 
Property and equipment, net
    40,658       35,572  
Goodwill and intangible assets, net
    107,287       21,530  
Other assets
    20,954       16,938  
 
   
 
     
 
 
Total
  $ 447,182     $ 367,770  
 
   
 
     
 
 
Liabilities and shareholders’ equity
               
Accounts payable and other current liabilities
  $ 71,037     $ 63,115  
Deferred revenue
    106,967       82,614  
 
   
 
     
 
 
Total current liabilities
    178,004       145,729  
 
   
 
     
 
 
Long-term debt
    2,200        
Shareholders’ equity:
               
Common stock and additional paid-in capital
    70,085       53,102  
Retained earnings
    196,893       168,939  
 
   
 
     
 
 
Total shareholders’ equity
    266,978       222,041  
 
   
 
     
 
 
Total
  $ 447,182     $ 367,770  
 
   
 
     
 
 

Condensed Consolidated Statements of Cash Flows

                 
    Twelve Months Ended
    November 30,   November 30,
(In thousands except per share data)
  2004
  2003
Cash flows from operations:
               
Net income
  $ 32,101     $ 27,074  
Depreciation, amortization and other noncash charges
    19,123       11,197  
Other changes in operating assets and liabilities
    21,086       19,409  
 
   
 
     
 
 
Net cash flows from operations
    72,310       57,680  
Capital expenditures
    (10,716 )     (7,134 )
Acquisitions, net of cash acquired
    (99,320 )     (24,255 )
Stock issuances, net of buybacks
    8,140       14,645  
Other
    1,722       1,002  
 
   
 
     
 
 
Net change in cash and short-term investments
    (27,864 )     41,938  
Cash and short-term investments, beginning of period
    219,131       177,193  
 
   
 
     
 
 
Cash and short-term investments, end of period
  $ 191,267     $ 219,131  
 
   
 
     
 
 

(PROGRESS SOFTWARE LOGO)