CUPERTINO, Calif., Oct. 9 /PRNewswire/ --
Rational Software Corporation(R) (Nasdaq: RATL) today announced results for
the second fiscal quarter and six months ended September 30, 2001.
Revenue for the second quarter and six months ended September 30, 2001 was
$163.7 million and $339.5 million, respectively, compared to $187.5 million
and $357.8 million, respectively, for the same periods last year. This
reflects a decrease in second quarter and year-to-date revenues of 13% and 5%,
respectively, compared to the same periods last year.
The company reported pro forma net income and earnings per share on a
diluted basis for the second quarter of fiscal 2002 of $9.5 million and $0.05,
respectively, compared to pro forma net income and earnings per share of $34.6
million and $0.17, respectively, for the same period last year. This reflects
a decrease in second quarter pro forma net income of 73% compared to the same
period last year.
The company reported pro forma net income and earnings per share on a
diluted basis for the six months ended September 30, 2001 of $25.7 million and
$0.12, respectively, compared to pro forma net income and earnings per share
of $61.5 million and $0.30, respectively, for the same periods last year.
This reflects a decrease in year-to-date pro forma net income of 58% compared
to the same period last year.
"During the second quarter, the macro-economic environment and the
September 11th attacks on the United States presented us with a serious
challenge. The fact that we are reporting solid second quarter results
highlights the focus, resolve and commitment of our team and our customers to
keep their businesses and our economy on track and moving forward," said Paul
Levy, chairman and co-founder of Rational Software. "It is clear to us and to
our customers that developing software is increasing in strategic importance.
As a result, investing in better software development technology is emerging
as a higher investment priority for our customers. Rational's momentum,
technical leadership, and the dedication of our team around the world will
enable us to seize the opportunity that these trends are presenting for us."
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 second
quarter ended September 30, 2001 was $21.6 million and $0.11, respectively,
compared to as reported net income and earnings per share of $19.7 million and
$0.10, respectively, for the same period last year.
As reported net loss and loss per share on a diluted basis for the six
months ended September 30, 2001 was $46.4 million and $0.24, respectively,
compared to as reported net income and earnings per share of $39.0 million and
$0.19, 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 $796.7 million in its twelve
months ended September 30, 2001, and over 3,800 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 September 30
(unaudited)
2001 % 2000 %
Net product revenue $71,709 44 $107,966 58
Consulting and support
revenue 92,025 56 79,535 42
Total revenue 163,734 100 187,501 100
Cost of product revenue 7,113 4 7,926 4
Cost of consulting and
support revenue 18,778 12 20,291 11
Total cost of revenue 25,891 16 28,217 15
Gross margin 137,843 84 159,284 85
Operating expenses:
Product research and
development expenses 43,245 27 34,129 18
Sales and marketing
expenses 72,249 44 73,631 39
General and
administrative
expenses 13,401 8 10,687 6
Total operating
expenses 128,895 79 118,447 63
Operating income 8,948 5 40,837 22
Other income, net 4,656 3 8,579 4
Income before income
taxes 13,604 8 49,416 26
Provision for income
taxes 4,057 2 14,816 8
Net income $9,547 6 $34,600 18
NOTE: PRO FORMA ONLY
Net income per common share:
Basic $0.05 $0.19
Diluted $0.05 $0.17
Shares used in computing per share amounts:
Basic 195,184 186,789
Diluted 204,340 205,858
Six months ended September 30
(unaudited)
2001 % 2000 %
Net product revenue $155,023 46 $207,266 58
Consulting and support
revenue 184,504 54 150,532 42
Total revenue 339,527 100 357,798 100
Cost of product
revenue 11,612 3 13,746 4
Cost of consulting and
support revenue 39,177 12 38,467 11
Total cost of
revenue 50,789 15 52,213 15
Gross margin 288,738 85 305,585 85
Operating expenses:
Product research and
development expenses 90,905 26 66,029 18
Sales and marketing
expenses 145,813 43 144,581 41
General and
administrative
expenses 26,365 8 20,712 6
Total operating
expenses 263,083 77 231,322 65
Operating income 25,655 8 74,263 20
Other income, net 11,048 3 13,561 4
Income before
income taxes 36,703 11 87,824 24
Provision for
income taxes 10,986 3 26,333 7
Net income $25,717 8 $61,491 17
NOTE: PRO FORMA ONLY
Net income per common share:
Basic $0.13 $0.33
Diluted $0.12 $0.30
Shares used in computing per share amounts:
Basic 196,028 184,879
Diluted 207,855 203,594
The above pro forma statements of operations for the quarter and six
months ended September 30, 2001 have been adjusted to present the Company'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 Six months ended
September 30 September 30
(unaudited) (unaudited)
2001 2000 2001 2000
As reported net
income (loss) $(21,630) $19,689 $(46,438) $39,050
Activity relating to
Catapulse:
Deferred compensation - 190 - 380
Research and
development expenses - 11,282 - 17,675
Sales and marketing
expenses - 4,765 - 4,765
General and
administrative expenses - 1,412 - 1,412
Interest earned on
cash and cash equivalents - (969) - (2,022)
Minority interest - (5,707) - (7,696)
Total Catapulse activity,
net of minority interest - 10,973 - 14,514
Amortization of goodwill
and purchased intangibles,
net of tax, relating to
recent acquisitions 20,397 3,938 40,035 7,927
Amortization of stock
based compensation,
net of tax 10,779 - 21,721 -
Restructuring costs,
net of tax - - 10,399 -
Pro forma net income $9,547 $34,600 $25,717 $61,491
Rational Software Corporation
Condensed Consolidated Statements of Operations
(in thousands, except percentage figures and per share data)
Three months ended September 30
(unaudited)
2001 % 2000 %
Net product revenue $71,709 44 $107,966 58
Consulting and support
revenue 92,025 56 79,535 42
Total revenue 163,734 100 187,501 100
Cost of product revenue 11,872 7 8,585 5
Cost of consulting and
support revenue 18,778 12 20,291 11
Total cost of revenue 30,650 19 28,876 16
Gross margin 133,084 81 158,625 84
Operating expenses:
Product research and
development expenses 43,245 27 45,411 24
Sales and marketing
expenses 72,249 44 78,396 41
General and
administrative
expenses 13,401 8 12,099 6
Amortization of
goodwill and purchased
intangibles 18,107 11 3,278 2
Amortization of
stock-based
compensation 17,966 11 190 -
Restructuring costs - - - -
Total operating
expenses 164,968 101 139,374 73
Operating income
(loss) (31,884) (20) 19,251 11
Other income, net 4,656 3 9,547 5
Income (loss) before
income taxes (27,228) (17) 28,798 16
Provision for
(benefit from)
income taxes (5,598) (4) 14,816 8
Minority interest - - (5,707) (3)
Net income (loss) $(21,630) (13) $19,689 11
Net income (loss) per common share:
Basic $(0.11) $0.11
Diluted $(0.11) $0.10
Shares used in computing per share amounts:
Basic 195,184 186,789
Diluted 195,184 205,858
Six months ended September 30
(unaudited)
2001 % 2000 %
Net product revenue $155,023 46 $207,266 58
Consulting and support
revenue 184,504 54 150,532 42
Total revenue 339,527 100 357,798 100
Cost of product
revenue 20,057 5 15,073 4
Cost of consulting
and support revenue 39,177 12 38,467 11
Total cost of revenue 59,234 17 53,540 15
Gross margin 280,293 83 304,258 85
Operating expenses:
Product research and
development expenses 90,905 26 83,704 23
Sales and marketing
expenses 145,813 43 149,346 42
General and
administrative
expenses 26,365 8 22,124 6
Amortization of
goodwill and
purchased intangibles 36,094 11 6,599 2
Amortization of
stock-based
compensation 36,203 11 380 -
Restructuring costs 17,331 5 - -
Total operating
expenses 352,711 104 262,153 73
Operating income
(loss) (72,418) (21) 42,105 12
Other income, net 11,048 3 15,582 4
Income (loss) before
income taxes (61,370) (18) 57,687 16
Provision for
(benefit from)
income taxes (14,932) (4) 26,333 7
Minority interest - - (7,696) (2)
Net income (loss) $(46,438) (14) $39,050 11
Net income (loss) per common share:
Basic $(0.24) $0.21
Diluted $(0.24) $0.19
Shares used in computing per share amounts:
Basic 196,028 184,879
Diluted 196,028 203,594
Rational Software Corporation
Condensed Consolidated Balance Sheets
(in thousands)
September 30,March 31,
2001 2001
(unaudited)
Assets
Current assets:
Cash and cash equivalents and short-term
investments $929,699 $1,040,821
Accounts receivable, net 141,951 206,099
Prepaid expenses and other assets 30,467 21,902
Deferred tax asset 16,727 16,727
Total current assets 1,118,844 1,285,549
Property and equipment, net 100,458 103,239
Goodwill and purchased intangibles, net 271,652 294,824
Other assets, net 26,853 25,711
Total assets $1,517,807 $1,709,323
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $14,095 $23,909
Accrued employee benefits 43,803 68,624
Income taxes payable 28,455 30,788
Other accrued expenses 40,520 49,753
Accrued merger and integration expenses 17,280 19,970
Deferred revenue 162,931 166,531
Total current liabilities 307,084 359,575
Convertible subordinated notes 500,000 500,000
Long term deferred tax liabilities 35,899 57,900
Other noncurrent liabilities 23,406 25,594
Total liabilities 866,389 943,069
Stockholders' equity:
Common stock 686,411 754,809
Retained earnings/(Accumulated deficit) (34,993) 11,445
Total stockholders' equity 651,418 766,254
Total liabilities and stockholders' equity $1,517,807 $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:
Press: Bill Durling, Director of Corporate
Communications, +1- 781-372-5886, bdurling@rational.com, or
Financial: 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 Software
Corporation
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