PROGRESS SOFTWARE CORPORATION
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): June 17, 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)


Item 7. Financial Statements and Exhibits

(c) Exhibits

The exhibit listed below is being furnished with this Form 8-K.

     
Exhibit    
Number
  Description
99.1
  Press Release dated June 17, 2004.

 


TABLE OF CONTENTS

Item 7. Financial Statements and Exhibits
Item 12. Results of Operations and Financial Condition
SIGNATURES
EX-99.1 PRESS RELEASE DATED JUNE 17, 2004


Table of Contents

Item 12. Results of Operations and Financial Condition

On June 17, 2004, Progress Software Corporation (the Company) announced via press release the Company’s financial results for the second quarter ended May 31, 2004. A copy of the Company’s press release is attached as Exhibit 99.1. This Form 8-K, the information contained herein, and the attached exhibit are furnished under Item 12 of Form 8-K and are furnished to, but not filed with, the SEC.

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: June 17, 2004
Progress Software Corporation
 
   
By: /s/ Norman R. Robertson
  Senior Vice President, Finance and
       Administration and Chief
       Financial Officer

 

EX-99.1 PRESS RELEASE DATED JUNE 17, 2004
 

EXHIBIT 99.1

PROGRESS SOFTWARE REPORTS SECOND QUARTER RESULTS

Revenue up 17% to Record High; Net Income and EPS up Sharply

BEDFORD, Mass., June 17, 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 second quarter ended May 31, 2004. Revenue for the quarter was a record $90.8 million, up 17 percent (11 percent at constant currency) from $77.6 million in the second quarter of 2003. Software license revenue, also a record, increased 36 percent (30 percent at constant currency) to $36.9 million from $27.1 million in the same quarter last year.

On a generally accepted accounting principles (GAAP) basis, operating income increased 25 percent to $11.5 million from $9.2 million in the second quarter of fiscal 2003. Net income increased 21 percent to $8.1 million from $6.7 million in the same quarter last year. Diluted earnings per share increased 17 percent to 21 cents from 18 cents in second quarter of 2003. These results include after-tax charges for amortization of acquired intangibles of $1.3 million for the second quarter of fiscal 2004 and $0.4 million for the second quarter of 2003.

On a pro forma basis, excluding the charges for amortization of acquired intangibles, operating income increased 36 percent to $13.3 million from $9.8 million in the second quarter of fiscal 2003. Pro forma net income increased 31 percent to $9.4 million from $7.1 million in the same quarter last year. Pro forma diluted earnings per share increased 26 percent to 24 cents from 19 cents in the second quarter of fiscal 2003.

The company’s cash and short-term investments at the end of the quarter totaled $175.6 million. During the second quarter, the company purchased approximately 152,000 shares of its stock at a cost of $3.3 million. The company’s existing repurchase authorization, under which 9.8 million shares remain available for repurchase, expires on September 30, 2004.

“Progress Software Corporation continues to outperform other major software companies, and we are pleased with the significant revenue contributions from DataDirect and ObjectStore which complement the growth achieved by Progress Software and Sonic Software,” said Joseph W. Alsop, co-founder and chief executive officer of PSC. “We continue to leverage our growth to deliver greater operating margins and sharply increased pro forma operating income, net income and EPS.”

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

Significant new partners and customers adopting technology from PSC companies, or deploying solutions using PSC technology, include: Best Software, Inc., Agenzia Nazionale Stampa Associata, Australian Bakels Pty. Ltd., Belfield Furnishings Ltd.,

 


 

Bourse de Luxembourg, Century Drills & Tool Company, Inc., The Church of Jesus Christ of Latter-day Saints, Clays Limited, CommScope, Inc., Demco Worldwide LTD., Digital Globe, Inc., FGM, Inc., Free State Legislature, Kelly-Goodwin Company, Lean Logistics, Inc., Perfect Commerce, Inc., VAL Informatique, and Wintergreen Orchard House.

Significant existing partners and customers adopting technology from different PSC companies, or making substantial additional deployments of PSC technology, include: Acer Computer Australia Pty, Ltd., Bear Stearns & Co. Inc., Berkshire Securities, Inc., Borland Software Corporation, Charter One Bank, Deutsche Post, Hyperion, International Steel Group, JP Morgan Chase, Lockheed Martin, Lucent Technologies, Peugeot Citroen Automobiles, Prebon Yamane, Progressive Casualty Insurance Company, Merck & Co. Inc., Sovereign Bank, Sun Microsystems, and Teradata (NCR Corporation).

Other Recent Highlights

Progress Software announced the expansion of its award-winning Progress® Partner Program with enhanced Business, Technical and Operational Empowerment offerings designed to help their Application Partners (APs) grow their businesses. Since the Partner Program inception, participants have averaged revenue growth more than 20 percent higher than those who have not participated.
http://www.progress.com/index/pressrelease 278330/pritem.ssp

DataDirect Technologies announced the availability of a suite of new database connectivity products. The suite includes, DataDirect Connect(R) for ODBC release 5.0, DataDirect Connect(R) for .NET release 2.1 and DataDirect Connect(R) for JDBC(TM) release 3.4, and offers unmatched functionality, performance and database support, providing users with the most reliable connection to data from virtually any application and platform to all major databases.

http://www.datadirect.com/news/releases/20040524_c/index.ssp

Sonic Software released Sonic ESB™ 5.5. Sonic ESB makes it possible for companies to build out an event-driven, service-oriented architecture (SOA) that can adapt to ever-changing business requirements. Sonic ESB 5.5 incorporates Sonic Continuous Availability Architecture™ (CAA) to deliver highly available communications between applications in an enterprise SOA.

http://www.sonicsoftware.com/news_events/press/pressitem/pressrelease_284663/index.ssp?

In April, Progress Software announced that 13 of its customers were named Laureates for the 2004 Computerworld Honors 21st Century Achievement Awards, which recognize the world’s most creative and innovative uses of information technology in society.http://www.progress.com/index/pressrelease_248501/pritem.ssp? Out of this field of Progress customers, two were named finalists: Kirchner Corporation and Perkins School for the Blind. Last week, the Progress-based wireless application used by Kirchner Corporation, and built by Progress AP, Jargon Software, was named the winner of the Computerworld Honors Award for innovation in manufacturing.

http://www.progress.com/index/pressrelease_290497/pritem.ssp?

ObjectStore announced ObjectCache™ Version 2.0, with its new Data Source Synchronization (DSS) capability to integrate with corporate databases. ObjectCache extends corporate databases non-invasively to improve the scalability and performance of

 


 

the systems that depend on them, and to add new services based on high performance access to existing data.

http://www.progress.com/company_info/news_views/pressrelease_228353/pritem.ssp

Progress Software announced the results of the Aberdeen Group’s Executive White Paper, “Embedded Infrastructure and Mass-Deployment Cost-of-Ownership Study: 2003 Update.” Aberdeen demonstrated that over a five-year period, the Progress® OpenEdge™ Platform is 40 percent less expensive than Microsoft, 50 percent less than IBM, and 90 percent less than Oracle in a mass-deployment architecture. The savings are attributed to the OpenEdge platform’s combined strength of low deployment costs in a Web-based environment, low ongoing fees and low database administration costs.

http://www.progress.com/company_info/news_views/pressrelease_221282/pritem.ssp?

Business Outlook

The company is providing the following guidance for the fiscal third quarter ending August 31, 2004:

  Revenue is expected to be in the range of $88 million to $90 million. GAAP operating income is expected to be in the range of $11 million to $12 million, including amortization of acquired intangibles of $1.8 million.
 
  GAAP diluted earnings per share are expected to be in the range of 20 cents to 21 cents.
 
  On a pro forma basis, operating income is expected to be in the range of $13 million to $14 million excluding amortization of acquired intangibles of $1.8 million.
 
  On a pro forma basis, diluted earnings per share are expected to be in the range of 23 cents to 24 cents excluding approximately 3 cents per share for amortization of acquired intangibles.

The company is providing the following guidance for the fiscal year ended November 30, 2004:

  Revenue is expected to be in the range of $360 million to $365 million. GAAP operating income is expected to be in the range of $43 million to $45 million, including amortization of acquired intangibles of $7 million and in-process research and development of $2.6 million.
 
  GAAP diluted earnings per share are expected to be in the range of 77 cents to 80 cents.
 
  On a pro forma basis, operating income is expected to be in the range of $53 million to $55 million excluding amortization of acquired intangibles of $7 million and in-process research and development of $2.6 million.
 
  On a pro forma basis, diluted earnings per share are expected to be in the range of 94 cents to 97 cents excluding approximately 12 cents per share for amortization

 


 

  of acquired intangibles and approximately 5 cents per share for an acquisition-related charge for in-process research and development.

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, generally accepted accounting principles 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 second 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, OpenEdge, ObjectCache, and Progress OpenEdge are trademarks or registered trademarks of
Progress Software Corporation in the U.S. and other countries. SonicMQ, Sonic ESB, and Sonic

 


 

Coninuous Availability Architecture are trademarks or registered trademarks of Sonic Software
Corporation in the U.S. and other countries. DataDirect Connect is a registered trademark of DataDirect
Technologies in the U.S. Any other trademarks or service marks contained herein are the property of their
respective owners.

 


 

Progress Software Corporation
Condensed Consolidated Statements of Income

                         
    Three Months Ended
    May 31,   May 31,   Percent
(In thousands except per share data)
  2004
  2003
  Change
Revenue:
                       
Software licenses
  $ 36,905     $ 27,074       36 %
Maintenance and services
    53,872       50,476       7 %
 
   
 
     
 
         
Total revenue
    90,777       77,550       17 %
 
   
 
     
 
         
Costs and expenses:
                       
Cost of software licenses
    2,299       2,242          
Cost of maintenance and services
    13,959       12,790          
Sales and marketing
    36,100       31,917          
Product development
    15,275       12,749          
General and administrative
    9,837       8,083          
Amortization of purchased intangibles
    1,837       604          
In-process research and development
                   
 
   
 
     
 
         
Total costs and expenses
    79,307       68,385       16 %
 
   
 
     
 
         
Income from operations
    11,470       9,165       25 %
Other income, net
    247       392          
 
   
 
     
 
         
Income before provision for income taxes
    11,717       9,557       23 %
Provision for income taxes
    3,632       2,867          
 
   
 
     
 
         
Net income
  $ 8,085     $ 6,690       21 %
 
   
 
     
 
         
Earnings per share:
                       
Basic
  $ 0.22     $ 0.20       10 %
Diluted
  $ 0.21     $ 0.18       17 %
 
   
 
     
 
         
Weighted average shares outstanding:
                       
Basic
    36,045       33,844       7 %
Diluted
    39,233       37,829       4 %
 
   
 
     
 
         

Pro Forma Condensed Consolidated Statements of Income

                                                         
    Three Months Ended May 31, 2004
  Three Months Ended May 31, 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
  $ 36,905             $ 36,905     $ 27,074             $ 27,074       36 %
Maintenance and services
    53,872               53,872       50,476               50,476       7 %
 
   
 
             
 
     
 
             
 
         
Total revenue
    90,777               90,777       77,550               77,550       17 %
 
   
 
             
 
     
 
             
 
         
Costs and expenses:
                                                       
Cost of software licenses
    2,299               2,299       2,242               2,242          
Cost of maintenance and services
    13,959               13,959       12,790               12,790          
Sales and marketing
    36,100               36,100       31,917               31,917          
Product development
    15,275               15,275       12,749               12,749          
General and administrative
    9,837               9,837       8,083               8,083          
Amortization of purchased intangibles
    1,837     $ (1,837 )           604     $ (604 )              
In-process research and development
                                           
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Total costs and expenses
    79,307       (1,837 )     77,470       68,385       (604 )     67,781       14 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income from operations
    11,470       1,837       13,307       9,165       604       9,769       36 %
Other income, net
    247               247       392               392          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income before provision for income taxes
    11,717       1,837       13,554       9,557       604       10,161       33 %
Provision for income taxes
    3,632       569       4,201       2,867       181       3,048          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Net income
  $ 8,085     $ 1,268     $ 9,353     $ 6,690     $ 423     $ 7,113       31 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Earnings per share:
                                                       
Basic
  $ 0.22             $ 0.26     $ 0.20             $ 0.21       24 %
Diluted
  $ 0.21             $ 0.24     $ 0.18             $ 0.19       26 %
 
   
 
             
 
     
 
             
 
         
Weighted average shares outstanding:
                                                       
Basic
    36,045               36,045       33,844               33,844       7 %
Diluted
    39,233               39,233       37,829               37,829       4 %
 
   
 
             
 
     
 
             
 
         

 


 

Progress Software Corporation
Condensed Consolidated Statements of Income

                         
    Six Months Ended
    May 31,   May 31,   Percent
(In thousands except per share data)
  2004
  2003
  Change
Revenue:
                       
Software licenses
  $ 70,800     $ 52,528       35 %
Maintenance and services
    106,352       96,844       10 %
 
   
 
     
 
         
Total revenue
    177,152       149,372       19 %
 
   
 
     
 
         
Costs and expenses:
                       
Cost of software licenses
    4,891       4,405          
Cost of maintenance and services
    26,785       25,907          
Sales and marketing
    72,280       61,148          
Product development
    29,884       25,207          
General and administrative
    19,513       16,996          
Amortization of purchased intangibles
    3,396       1,082          
In-process research and development
    2,600       200          
 
   
 
     
 
         
Total costs and expenses
    159,349       134,945       18 %
 
   
 
     
 
         
Income from operations
    17,803       14,427       23 %
Other income, net
    639       1,184          
 
   
 
     
 
         
Income before provision for income taxes
    18,442       15,611       18 %
Provision for income taxes
    5,717       4,683          
 
   
 
     
 
         
Net income
  $ 12,725     $ 10,928       16 %
 
   
 
     
 
         
Earnings per share:
                       
Basic
  $ 0.36     $ 0.32       13 %
Diluted
  $ 0.33     $ 0.30       10 %
 
   
 
     
 
         
Weighted average shares outstanding:
                       
Basic
    35,845       33,628       7 %
Diluted
    39,094       36,703       7 %
 
   
 
     
 
         

Pro Forma Condensed Consolidated Statements of Income

                                                         
    Six Months Ended May 31, 2004
  Six Months Ended May 31, 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
  $ 70,800             $ 70,800     $ 52,528             $ 52,528       35 %
Maintenance and services
    106,352               106,352       96,844               96,844       10 %
 
   
 
             
 
     
 
             
 
         
Total revenue
    177,152               177,152       149,372               149,372       19 %
 
   
 
             
 
     
 
             
 
         
Costs and expenses:
                                                       
Cost of software licenses
    4,891               4,891       4,405               4,405          
Cost of maintenance and services
    26,785               26,785       25,907               25,907          
Sales and marketing
    72,280               72,280       61,148               61,148          
Product development
    29,884               29,884       25,207               25,207          
General and administrative
    19,513               19,513       16,996               16,996          
Amortization of purchased intangibles
    3,396     $ (3,396 )           1,082     $ (1,082 )              
In-process research and development
    2,600       (2,600 )           200       (200 )              
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Total costs and expenses
    159,349       (5,996 )     153,353       134,945       (1,282 )     133,663       15 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income from operations
    17,803       5,996       23,799       14,427       1,282       15,709       51 %
Other income, net
    639               639       1,184               1,184          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Income before provision for income taxes
    18,442       5,996       24,438       15,611       1,282       16,893       45 %
Provision for income taxes
    5,717       1,859       7,576       4,683       384       5,067          
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Net income
  $ 12,725     $ 4,137     $ 16,862     $ 10,928     $ 898     $ 11,826       43 %
 
   
 
     
 
     
 
     
 
     
 
     
 
         
Earnings per share:
                                                       
Basic
  $ 0.36             $ 0.47     $ 0.32             $ 0.35       34 %
Diluted
  $ 0.33             $ 0.43     $ 0.30             $ 0.32       34 %
 
   
 
             
 
     
 
             
 
         
Weighted average shares outstanding:
                                                       
Basic
    35,845               35,845       33,628               33,628       7 %
Diluted
    39,094               39,094       36,703               36,703       7 %
 
   
 
             
 
     
 
             
 
         

 


 

Progress Software Corporation
Condensed Consolidated Balance Sheets

                 
    May 31,   November 30,
(In thousands)
  2004
  2003
Assets
               
Cash and short-term investments
  $ 175,615     $ 219,131  
Accounts receivable, net
    56,002       52,065  
Other current assets
    26,121       22,534  
 
   
 
     
 
 
Total current assets
    257,738       293,730  
 
   
 
     
 
 
Property and equipment, net
    35,668       35,572  
Goodwill and intangible assets, net
    101,154       21,530  
Other assets
    17,289       16,938  
 
   
 
     
 
 
Total
  $ 411,849     $ 367,770  
 
   
 
     
 
 
Liabilities and shareholders’ equity
               
Accounts payable and other current liabilities
  $ 59,021     $ 63,115  
Deferred revenue
    106,947       82,614  
 
   
 
     
 
 
Total current liabilities
    165,968       145,729  
 
   
 
     
 
 
Shareholders’ equity:
               
Common stock and additional paid-in capital
    66,412       53,102  
Retained earnings
    179,469       168,939  
 
   
 
     
 
 
Total shareholders’ equity
    245,881       222,041  
 
   
 
     
 
 
Total
  $ 411,849     $ 367,770  
 
   
 
     
 
 

Condensed Consolidated Statements of Cash Flows

                 
    Six Months Ended
    May 31,   May 31,
(In thousands except per share data)
  2004
  2003
Cash flows from operations:
               
Net income
  $ 12,725     $ 10,928  
Depreciation, amortization and other noncash charges
    10,833       5,847  
Other changes in operating assets and liabilities
    16,755       13,143  
 
   
 
     
 
 
Net cash flows from operations
    40,313       29,918  
Capital expenditures
    (4,032 )     (2,066 )
Acquisitions, net of cash acquired
    (87,520 )     (25,164 )
Stock issuances, net of buybacks
    8,228       8,586  
Other
    (505 )     2,126  
 
   
 
     
 
 
Net change in cash and short-term investments
    (43,516 )     13,400  
Cash and short-term investments, beginning of period
    219,131       177,193  
 
   
 
     
 
 
Cash and short-term investments, end of period
  $ 175,615     $ 190,593  
 
   
 
     
 
 

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