CUPERTINO, Calif., Jan. 16 /PRNewswire-FirstCall/--
Rational Software Corporation (Nasdaq: RATL) today announced results for the
third fiscal quarter ended December 31, 2002.
(Photo: http://www.newscom.com/cgi-bin/prnh/20010417/RATLLOGO )
Revenue for the third quarter and nine months ended December 31, 2002 was
$161.9 million and $468.9 million, respectively, compared to $170.2 million
and $509.7 million, respectively, for the same periods last year. This
reflects a decrease in third quarter and year-to-date revenues of 5 percent
and 8 percent, 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 2003 of $11.1 million and $0.06,
respectively, compared to pro forma net income and earnings per share of $13.3
million and $0.07, respectively, for the same period last year. This reflects
a decrease in third quarter pro forma net income of 16 percent 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, 2002 of $25.5 million and $0.13,
respectively, compared to pro forma net income and earnings per share of $39.0
million and $0.19, respectively, for the same period last year. This reflects
a decrease in year-to-date pro forma net income of 35 percent compared to the
same period last year.
Pro forma net income and earnings per share for the periods reported
exclude one-time charges for acquired in-process research and development,
amortization of goodwill and purchased intangibles, amortization of stock-
based compensation related to recent acquisitions, and restructuring and other
charges.
As reported net loss and loss per share on a diluted basis for the third
quarter ended December 31, 2002 was $3.6 million and $0.02, respectively,
compared to as reported net loss and loss per share on a diluted basis of
$17.9 million and $0.09, respectively, for the same period last year. The
non-cash charges related to amortization of goodwill and intangibles, net of
tax, dropped from $20.3 million in the quarter ended December 31, 2001 to $3.6
million in the quarter ended December 31, 2002, primarily resulting from the
adoption of Statement of Financial Accounting Standards No. 142 as of April 1,
2002.
As reported net loss and loss per share on a diluted basis for the nine
months ended December 31, 2002 was $29.4 million and $0.15, respectively,
compared to as reported net loss and loss per share on a diluted basis of
$64.3 million and $0.33, respectively, for the same period last year. The
non-cash charges related to amortization of goodwill and intangibles, net of
tax, dropped from $60.3 million in the nine months ended December 31, 2001 to
$9.8 million in the nine months ended December 31, 2002, primarily resulting
from the adoption of Statement of Financial Accounting Standards No. 142 as of
April 1, 2002.
Management will host the quarterly conference call today to discuss the
results beginning at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time.
Interested parties may listen to the conference call via live broadcast on
Rational's Investor Relations Web site (http://investor.rational.com).
Domestic callers can dial in to the conference call at 1-800-611-1147 and
international callers can listen at 1-612-326-1011. The password is Rational.
For those unable to participate in the live call, replays will be
available approximately two hours after the earnings call ends. The replay
numbers are 1-800-475-6701 for domestic callers and 1-320-365-3844 for
international callers. The access code for the replay is 668405, and it will
be available to callers until approximately 11:00 p.m. Pacific Time on January
23, 2003. The conference call will also be archived on Rational's Investor
Relations Web site.
About Rational Software Corporation
Rational Software provides a software development platform that improves
the speed, quality, and predictability of software projects. This integrated,
full lifecycle solution combines software engineering best practices, market-
leading tools, and professional services. Ninety-eight 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 $649.0 million in its twelve months ended
December 31, 2002, and over 3,300 employees worldwide. Rational is a member
of the S&P 500 Index. Additional information is available at http://www.rational.com
and http://www.therationaledge.com, the monthly e-zine for the Rational community.
This press release contains certain "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained herein. The forward-looking statements
contained herein include statements relating to future revenue and pro forma
earnings per share on a diluted basis, future restructuring charges, and our
ability to utilize and/or sublease our facilities. Factors that could cause
actual results to differ materially from those described herein include, among
other factors, adverse changes in general economic conditions, increased
competition, adverse changes in the market for sophisticated development
tools, Rational's ability to manage expenses associated with its real property
leasing activities and risks related to Rational's proposed merger with IBM,
including, without limitation, the risk that the merger may not be consummated
in a timely manner, if at all, and risks regarding relations with employees,
customers, suppliers and partners. More detailed information about these
factors is set forth in the reports filed by Rational with the Securities and
Exchange Commission. Rational Software is under no obligation to (and
expressly disclaims any such obligation to) update or alter its forward-
looking statements, whether as a result of new information, future events or
otherwise.
Contacts:
Press:
Bill Durling, Director of Corporate Communications
(781) 372-5886
bdurling@rational.com
Financial:
David Henshall, Chief Financial Officer
(408) 863-4500
ir@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)
2002 % 2001 %
Net product revenue $64,768 40 $77,466 46
Consulting and support
revenue 97,155 60 92,685 54
Total revenue 161,923 100 170,151 100
Cost of product revenue 6,573 4 7,130 5
Cost of consulting and
support revenue 18,286 11 19,513 11
Total cost of revenue 24,859 15 26,643 16
Gross margin 137,064 85 143,508 84
Operating expenses:
Product research and
development expenses 40,744 25 42,581 25
Sales and marketing
expenses 69,527 43 71,531 42
General and
administrative
expenses 11,893 8 13,694 8
Total operating
expenses 122,164 76 127,806 75
Operating income 14,900 9 15,702 9
Other income, net 570 1 3,235 2
Income before
income taxes 15,470 10 18,937 11
Provision for
income taxes 4,332 3 5,681 3
Net income $11,138 7 $13,256 8
NOTE: PRO FORMA ONLY
Net income per common share:
Basic $0.06 $0.07
Diluted $0.06 $0.07
Shares used in computing per share amounts:
Basic 191,326 189,907
Diluted 196,861 199,313
Nine months ended December 31
(unaudited)
2002 % 2001 %
Net product revenue $185,166 39 $232,489 46
Consulting and
support revenue 283,740 61 277,189 54
Total revenue 468,906 100 509,678 100
Cost of product
revenue 17,448 4 18,741 3
Cost of consulting
and support revenue 53,586 11 58,691 12
Total cost of revenue 71,034 15 77,432 15
Gross margin 397,872 85 432,246 85
Operating expenses:
Product research
and development
expenses 123,764 26 133,487 26
Sales and marketing
expenses 208,298 44 217,344 43
General and
administrative
expenses 34,472 8 40,059 8
Total operating
expenses 366,534 78 390,890 77
Operating income 31,338 7 41,356 8
Other income, net 4,059 1 14,284 3
Income before income
taxes 35,397 8 55,640 11
Provision for income
taxes 9,911 3 16,668 3
Net income $25,486 5 $38,972 8
NOTE: PRO FORMA ONLY
Net income per common share:
Basic $0.13 $0.20
Diluted $0.13 $0.19
Shares used in computing per share amounts:
Basic 190,489 193,988
Diluted 196,271 205,007
The above pro forma statements of operations have been adjusted to present
Rational's operating results excluding one-time charges for acquired in-
process research and development, amortization of goodwill and purchased
intangibles, amortization of stock-based compensation related to recent
acquisitions, and restructuring and other charges.
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)
2002 2001 2002 2001
As reported net loss $(3,558) $(17,858) $(29,405) $(64,296)
Amortization of
goodwill and
purchased intangibles,
net of tax, relating
to recent acquisitions 3,550 20,271 9,839 60,305
Amortization of
stock-based
compensation,
net of tax 11,146 10,843 33,099 32,564
Charges for acquired
in-process research
and development - - 4,524 -
Restructuring and
other charges,
net of tax - - 7,429 10,399
Pro forma net income $11,138 $13,256 $25,486 $38,972
Rational Software Corporation
Condensed Consolidated Statements of Operations
(in thousands, except percentage figures and per share data)
Three months ended December 31
(unaudited)
2002 % 2001 %
Net product revenue $64,768 40 $77,466 46
Consulting and support
revenue 97,155 60 92,685 54
Total revenue 161,923 100 170,151 100
Cost of product revenue 12,159 8 11,881 7
Cost of consulting and
support revenue 18,286 11 19,513 11
Total cost of revenue 30,445 19 31,394 18
Gross margin 131,478 81 138,757 82
Operating expenses:
Product research
and development
expenses 40,744 25 42,581 25
Sales and marketing
expenses 69,527 43 71,531 42
General and
administrative
expenses 11,893 8 13,694 8
Amortization of
goodwill and
purchased intangibles 330 - 18,019 11
Amortization of
stock-based
compensation 18,578 11 18,071 11
Charges for acquired
in-process research
and development - - - -
Restructuring and other
charges - - - -
Total operating
expenses 141,072 87 163,896 97
Operating loss (9,594) (6) (25,139) (15)
Other income, net 570 - 3,235 2
Loss before income
taxes (9,024) (6) (21,904) (13)
Benefit from income
taxes (5,466) (4) (4,046) (3)
Net loss $(3,558) (2) $(17,858) (10)
Net loss per common share:
Basic $(0.02) $(0.09)
Diluted $(0.02) $(0.09)
Shares used in computing per share amounts:
Basic 191,326 189,907
Diluted 191,326 189,907
Nine months ended December 31
(unaudited)
2002 % 2001 %
Net product revenue $185,166 39 $232,489 46
Consulting and
support revenue 283,740 61 277,189 54
Total revenue 468,906 100 509,678 100
Cost of product revenue 32,879
7 31,937 6
Cost of consulting
and support revenue 53,586 11 58,691 12
Total cost of revenue 86,465 18 90,628 18
Gross margin 382,441 82 419,050 82
Operating expenses:
Product research and
development
expenses 123,764 26 133,487 26
Sales and
marketing expenses 208,298 44 217,344 43
General and
administrative
expenses 34,472 8 40,059 8
Amortization of
goodwill and
purchased intangibles 967 - 54,113 11
Amortization of
stock-based
compensation 55,165 12 54,273 10
Charges for acquired
in-process research
and development 4,524 1 - -
Restructuring and
other charges 12,382 3 17,331 3
Total operating
expenses 439,572 94 516,607 101
Operating loss (57,131) (12) (97,557) (19)
Other income, net 4,059 1 14,284 3
Loss before income
taxes (53,072) (11) (83,273) (16)
Benefit from
income taxes (23,667) (5) (18,977) (3)
Net loss $(29,405) (6) $(64,296) (13)
Net loss per common share:
Basic $(0.15) $(0.33)
Diluted $(0.15) $(0.33)
Shares used in computing per share amounts:
Basic 190,489 193,988
Diluted 190,489 193,988
Rational Software Corporation
Condensed Consolidated Balance Sheets
(in thousands)
December 31, March 31,
2002 2002
(unaudited)
Assets
Current assets:
Cash and cash equivalents and short-term
investments $1,045,149 $960,383
Accounts receivable, net 126,466 149,896
Prepaid expenses and other assets 18,316 24,525
Deferred tax asset 19,714 19,714
Total current assets 1,209,645 1,154,518
Property and equipment, net 79,654 91,254
Goodwill and purchased intangibles, net 234,244 228,030
Other assets, net 31,832 29,417
Total assets $1,555,375 $1,503,219
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $10,067 $11,575
Accrued employee benefits 41,581 46,145
Income taxes payable 29,579 29,192
Other accrued expenses 52,998 42,445
Accrued merger and integration expenses 11,382 11,511
Deferred revenue 179,525 181,903
Total current liabilities 325,132 322,771
Convertible subordinated notes 500,000 500,000
Other noncurrent liabilities 26,764 42,472
Total liabilities 851,896 865,243
Stockholders' equity:
Common stock 797,387 702,479
Accumulated deficit (93,908) (64,503)
Total stockholders' equity 703,479 637,976
Total liabilities and stockholders' equity $1,555,375 $1,503,219
Rational, the Rational logo, Rational Software Corporation, among others,
are trademarks or registered trademarks of Rational Software Corporation in
the United States and/or in other countries. All other names are used for
identification purposes only and are trademarks or registered trademarks of
their respective companies.
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:
Press, Bill Durling, Director of Corporate
Communications, +1- 781-372-5886, bdurling@rational.com, or
Financial, David Henshall, Chief Financial Officer,
+1-408-863-4500, ir@rational.com, both of Rational Software
Corporation
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