CUPERTINO, Calif., Jan. 10 /PRNewswire/ --
Rational Software Corporation (Nasdaq: RATL) today announced results for the
third fiscal quarter and nine months ended December 31, 2001.
Revenue for the third quarter and nine months ended December 31, 2001 was
$170.2 million and $509.7 million, respectively, compared to $215.5 million
and $573.3 million, respectively, for the same periods last year. This
reflects a decrease in third quarter and year-to-date revenues of 21% and 11%,
respectively, compared to the same periods last year.
Rational reported pro forma net income and earnings per share on a diluted
basis for the third quarter of fiscal 2002 of $13.3 million and $0.07,
respectively, compared to pro forma net income and earnings per share of $40.2
million and $0.20, respectively, for the same period last year. This reflects
a decrease in third quarter pro forma net income of 67% compared to the same
period last year.
Rational reported pro forma net income and earnings per share on a diluted
basis for the nine months ended December 31, 2001 of $39.0 million and $0.19,
respectively, compared to pro forma net income and earnings per share of
$101.7 million and $0.50, respectively, for the same period last year. This
reflects a decrease in year-to-date pro forma net income of 62% compared to
the same period last year.
"During the third quarter, we produced very solid results under tough
macroeconomic conditions. We continued the momentum we created in the
previous quarter because of strong execution from our field and product teams
around the world," said Paul Levy, chairman and co-founder of Rational
Software. "Our customers view software development as crucial to their
business success. Through our combination of tools, best practices and
services, Rational is uniquely positioned to help those companies empower
their development teams to create great software that will help them maximize
their business results."
Pro forma earnings per share for the periods reported exclude one-time
charges for purchased in-process R&D, amortization of goodwill and purchased
intangibles, amortization of stock-based compensation related to recent
acquisitions, and restructuring charges, as well as the net activity
(operating expenses and interest income less portion allocated to minority
interest) incurred by Catapulse Inc. prior to the completion of the Catapulse
acquisition on February 5, 2001.
As reported net loss and loss per share on a diluted basis for the third
quarter ended December 31, 2001 was $17.9 million and $0.09, respectively,
compared to as reported net income and earnings per share of $26.5 million and
$0.13, respectively, for the same period last year.
As reported net loss and loss per share on a diluted basis for the nine
months ended December 31, 2001 was $64.3 million and $0.33, respectively,
compared to as reported net income and earnings per share of $65.6 million and
$0.32, respectively, for the same period last year.
(Photo: http://www.newscom.com/cgi-bin/prnh/20010417/RATLLOGO )
About Rational Software Corporation
Rational Software provides a software development platform that improves
the speed, quality, and predictability of software projects. This integrated,
full life-cycle solution combines software engineering best practices, market-
leading tools, and professional services. Ninety-six of the Fortune 100 rely
on Rational tools and services to build better software, faster. This open
platform is extended by partners who provide more than 500 complementary
products and services. Founded in 1981, Rational is one of the world's largest
software companies, with revenues of $751.4 million in its twelve months ended
December 31, 2001, and over 3,700 employees worldwide. Rational is a component
of the Nasdaq-100 Index(R). Additional information is available on the
Internet at http://www.rational.com.
Rational Software Corporation
Pro Forma Statements of Operations
(in thousands, except percentage figures and per share data)
Three months ended December 31
(unaudited)
2001 % 2000 %
Net product revenue $77,466 46 $128,895 60
Consulting and support
revenue 92,685 54 86,562 40
Total revenue 170,151 100 215,457 100
Cost of product revenue 7,130 5 7,237 3
Cost of consulting
and support revenue 19,513 11 24,853 12
Total cost of revenue 26,643 16 32,090 15
Gross margin 143,508 84 183,367 85
Operating expenses:
Product research and
development expenses 42,581 25 37,885 17
Sales and marketing
expenses 71,531 42 84,107 39
General and
administrative
expenses 13,694 8 12,545 6
Total operating
expenses 127,806 75 134,537 62
Operating income 15,702 9 48,830 23
Other income, net 3,235 2 8,660 4
Income before
income taxes 18,937 11 57,490 27
Provision
for income taxes 5,681 3 17,247 8
Net income $13,256 8 $40,243 19
NOTE: PRO FORMA ONLY
Net income per
common share:
Basic $0.07 $0.21
Diluted $0.07 $0.20
Shares used in
computing per
share amounts:
Basic 189,907 189,170
Diluted 199,313 205,732
Nine months ended December 31
(unaudited)
2001 % 2000 %
Net product revenue $232,489 46 $336,161 59
Consulting and support
revenue 277,189 54 237,094 41
Total revenue 509,678 100 573,255 100
Cost of product revenue 18,741 3 20,983 4
Cost of consulting
and support revenue 58,691 12 63,320 11
Total cost of revenue 77,432 15 84,303 15
Gross margin 432,246 85 488,952 85
Operating expenses:
Product research
and development
expenses 133,487 26 103,914 18
Sales and marketing
expenses 217,344 43 228,688 40
General and
administrative
expenses 40,059 8 33,257 6
Total operating
expenses 390,890 77 365,859 64
Operating income 41,356 8 123,093 21
Other income, net 14,284 3 22,221 4
Income before
income taxes 55,640 11 145,314 25
Provision for
income taxes 16,668 3 43,580 7
Net income $38,972 8 $101,734 18
NOTE: PRO FORMA ONLY
Net income per
common share:
Basic $0.20 $0.55
Diluted $0.19 $0.50
Shares used in
computing per
share amounts:
Basic 193,988 186,309
Diluted 205,007 204,307
The above pro forma statements of operations for the quarter and nine
months ended December 31, 2001 have been adjusted to present Rational's
operating results excluding one-time charges for purchased in-process R&D,
amortization of goodwill and purchased intangibles, amortization of stock-
based compensation related to recent acquisitions, and restructuring charges,
as well as the net activity (operating expenses and interest income less
portion allocated to minority interest) incurred by Catapulse Inc. prior to
the completion of the Catapulse acquisition on February 5, 2001.
The following table reflects the differences between pro forma and as-
reported net income (loss) (in thousands):
Three months ended Nine months ended
December 31 December 31
(unaudited) (unaudited)
2001 2000 2001 2000
As reported net
income (loss) $(17,858) $26,533 $(64,296) $65,583
Activity relating
to Catapulse:
Deferred compensation - 1,220 - 1,600
Research and
development expenses - 9,896 - 27,571
Sales and marketing
expenses - 3,259 - 8,024
General and
administrative expenses - 1,549 - 2,961
Interest earned on cash
and cash equivalents - (709) - (2,731)
Minority interest - (5,739) - (13,435)
Total Catapulse activity,
net of minority interest - 9,476 - 23,990
Amortization of
goodwill and purchased
intangibles,
net of tax, relating
to recent acquisitions 20,271 4,234 60,305 12,161
Amortization of stock
based compensation,
net of tax 10,843 - 32,564 -
Restructuring costs,
net of tax - - 10,399 -
Pro forma net income $13,256 $40,243 $38,972 $101,734
Rational Software Corporation
Condensed Consolidated Statements of Operations
(in thousands, except percentage figures and per share data)
Three months ended December 31
(unaudited)
2001 % 2000 %
Net product revenue $77,466 46 $128,895 60
Consulting and support
revenue 92,685 54 86,562 40
Total revenue 170,151 100 215,457 100
Cost of product revenue 11,881 7 7,906 3
Cost of consulting
and support revenue 19,513 11 24,853 12
Total cost of revenue 31,394 18 32,759 15
Gross margin 138,757 82 182,698 85
Operating expenses:
Product research and
development expenses 42,581 25 47,782 22
Sales and marketing
expenses 71,531 42 87,365 41
General and
administrative
expenses 13,694 8 14,095 6
Amortization of goodwill
and purchased
intangibles 18,019 11 3,565 2
Amortization
of stock-based
compensation 18,071 11 1,220 1
Restructuring costs - - - -
Total operating
expenses 163,896 97 154,027 72
Operating income
(loss) (25,139) (15) 28,671 13
Other income, net 3,235 2 9,370 5
Income (loss)
before income taxes (21,904) (13) 38,041 18
Provision for
(benefit from)
income taxes (4,046) (3) 17,247 8
Minority interest - - (5,739) (2)
Net income (loss) ($17,858) (10) $26,533 12
Net income (loss)
per common share:
Basic $(0.09) $0.14
Diluted $(0.09) $0.13
Shares used in
computing per
share amounts:
Basic 189,907 189,170
Diluted 189,907 205,732
Nine months ended December 31
(unaudited)
2001 % 2000 %
Net product revenue $232,489 46 $336,161 59
Consulting and support
revenue 277,189 54 237,094 41
Total revenue 509,678 100 573,255 100
Cost of product revenue 31,937 6 22,979 4
Cost of consulting
and support revenue 58,691 12 63,320 11
Total cost of revenue 90,628 18 86,299 15
Gross margin 419,050 82 486,956 85
Operating expenses:
Product research and
development expenses 133,487 26 131,486 23
Sales and marketing
expenses 217,344 43 236,711 42
General and
administrative
expenses 40,059 8 36,218 6
Amortization
of goodwill and
purchased intangibles 54,113 11 10,165 2
Amortization
of stock-based
compensation 54,273 10 1,600 -
Restructuring costs 17,331 3 - -
Total operating
expenses 516,607 101 416,180 73
Operating income (loss)(97,557) (19) 70,776 12
Other income, net 14,284 3 24,952 5
Income (loss)
before income taxes (83,273) (16) 95,728 17
Provision for
(benefit from)
income taxes (18,977) (3) 43,580 8
Minority interest - - (13,435) (2)
Net income (loss) ($64,296) (13) $65,583 11
Net income (loss)
per common share:
Basic $(0.33) $0.35
Diluted $(0.33) $0.32
Shares used in
computing per
share amounts:
Basic 193,988 186,309
Diluted 193,988 204,307
Rational Software Corporation
Condensed Consolidated Balance Sheets
(in thousands)
December 31, March 31,
2001 2001
(unaudited)
Assets
Current assets:
Cash and cash equivalents and
short-term investments $958,628 $1,040,821
Accounts receivable, net 146,052 206,099
Prepaid expenses and other assets 26,006 21,902
Deferred tax asset 16,727 16,727
Total current assets 1,147,413 1,285,549
Property and equipment, net 96,363 103,239
Goodwill and purchased intangibles, net 248,483 294,824
Other assets, net 25,783 25,711
Total assets $1,518,042 $1,709,323
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $11,003 $23,909
Accrued employee benefits 43,121 68,624
Income taxes payable 31,498 30,788
Other accrued expenses 44,374 49,753
Accrued merger and integration expenses 17,527 19,970
Deferred revenue 170,161 166,531
Total current liabilities 317,684 359,575
Convertible subordinated notes 500,000 500,000
Long term deferred tax liabilities 25,386 57,900
Other noncurrent liabilities 22,455 25,594
Total liabilities 865,525 943,069
Stockholders' equity:
Common stock 705,368 754,809
Retained earnings/(Accumulated deficit) (52,851) 11,445
Total stockholders' equity 652,517 766,254
Total liabilities and stockholders' equity $1,518,042 $1,709,323
The word "Rational" and Rational's products are trademarks of Rational
Software Corporation. References to other companies and their products use
trademarks owned by the respective companies and are for reference purposes
only.
For more information contact:
Rational Software Corporation, 18880 Homestead Road, Cupertino, CA 95014
Tel. (408) 863-9900 or (800) 728-1212; Fax (408) 863-4133
Fax-on-demand: 1-800-758-5804 Pin: 113375
E-mail: info@rational.com; Web: http://www.rational.com
SOURCE Rational Software Corporation
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Related links:
http://www.rational.com
Photo Notes:Newscom:
http://www.newscom.com/cgi-bin/prnh/20010417/RATLLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or 201-369-3467
CONTACT:
Bill Durling, Director of Corporate
Communications, +1-781-372-5886, bdurling@rational.com, or
Timothy A. Brennan, Chief Financial Officer, +1-408-863-4500, or
David Henshall, Vice President and Treasurer, +1-408-863-4500,
ir@rational.com, all of Rational
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