Compuware Reports Fiscal Year 2005 Third Quarter Results

Compuware Reports Fiscal Year 2005 Third Quarter Results Earnings of 11 Cents per Share Bolstered by 22.7 Percent Year-over-year Increase in Software License Fees, 14 Percent Professional Services Margin DETROIT, Jan. 25 /PRNewswire-FirstCall/ -- Compuware Corporation (NASDAQ:CPWR) today announced financial results for its third quarter, which ended December 31, 2004. "This is more like it," said Compuware Chairman and CEO Peter Karmanos, Jr. "These results confirm the confidence of Compuware's management in the company's ability to deliver sound third and fourth quarter results in fiscal 2005. I'm glad that the company is again moving in the right direction and look forward to a solid fourth quarter." Third Quarter Fiscal 2005 Results Compuware reports third quarter revenues of $330.5 million, compared to $318.2 million in the third quarter of the previous fiscal year. Net income was $41.7 million compared to $21.8 million in the same quarter of fiscal 2004. Earnings per share (diluted computation) were 11 cents compared to six cents, based upon 388.8 million and 385.9 million shares outstanding, respectively. During the company's third quarter, software license fees were $99.0 million, compared to $80.7 million in the same quarter of the previous year. Maintenance fees were $108.7 million, compared to $102.9 million in the third quarter of fiscal 2004. Revenue from professional services was $122.9 million, compared to $134.6 million in the same quarter last year. Third Quarter Fiscal Year 2005 Highlights During the third quarter, Compuware: -- Announced it acquired the technology assets of DevStream Corporation. The privately owned software company developed an advanced J2EE performance analysis product, which Compuware recently introduced as Vantage Analyzer for J2EE. -- Introduced the latest, enhanced version of the Compuware Vantage solution, which provides new service assurance capabilities to help IT organizations be more effective in their approach to delivering reliable service to business users. -- Reported that a new, independent research report published by industry analyst firm Gartner, Inc., confirmed the architected, rapid application development (ARAD) approach. The study examined the productivity and ROI benefits of service-oriented application development methods and found that ARAD can yield an ROI of up to 1,500 percent. ARAD is the approach used by Compuware OptimalJ, a leading, model-driven, pattern-based enterprise development solution. -- Introduced the latest releases in the XPEDITER product line, which help organizations better analyze, understand, debug and test their mainframe applications. Compuware XPEDITER enables organizations to reduce IT expenditures and leverage and extend their existing investments in legacy applications. -- Partnered with Collation, Inc. to provide configuration management capabilities to Compuware's application service management customers. -- Demonstrated at STARWEST 2004 two new DevPartner products -- Compuware DevPartner Fault Simulator(TM) and Compuware DevPartner SecurityChecker(TM) -- that significantly extend the ability to detect and diagnose software quality errors in Microsoft-technology applications during the development process. -- Announced an alliance with Dynamics Research Corporation (DRC) to develop applications for Ohio's Statewide Automated Child Welfare Information System. DRC was awarded the $30 million contract -- more than a third of which was earmarked for Compuware -- in a competitive RFP. -- Announced an agreement to provide Mitsubishi Motors Corporation of Japan with Covisint Communicate portal service. Covisint Communicate will help Mitsubishi improve sharing of information and collaborative business processes with suppliers. -- Demonstrated at the CU2004 Worldwide Uniface User Conference, the new capabilities of Uniface Jti, version 3.0, which helps eliminate the costs of rewriting and even re-architecting existing applications for the web. -- Announced details of its Uniface application platform suite, which consists of the Compuware Uniface development environment, the Uniface Flow business process management solution and Uniface View, a web application delivery framework. -- Was once again named as one of 101 Metropolitan Detroit's Best and Brightest Companies to Work For, as determined by the Michigan Business and Professional Association. -- Announced that Detroit Public Schools (DPS) had been awarded PeopleSoft's "Leaders in Supply Chain Management" award. PeopleSoft honored DPS for the district's innovation and excellence in the areas of procurement and supply-chain management. The IT organization of DPS operates in partnership with Compuware. Compuware Corporation Compuware Corporation (NASDAQ:CPWR) maximizes the value IT brings to the business by helping CIOs more effectively manage the business of IT. Compuware solutions accelerate the development, improve the quality and enhance the performance of critical business systems while enabling CIOs to align and govern the entire IT portfolio, increasing efficiency, cost control and employee productivity throughout the IT organization. Founded in 1973, Compuware serves the world's leading IT organizations, including more than 90 percent of the Fortune 100 companies. Learn more about Compuware at http://www.compuware.com/ . Conference Call Information Compuware will host a conference call today to discuss these results at 5:00 p.m. Eastern Time (22:00 GMT). Interested parties calling from the United States should call 877-459-8388. For international access, the conference call number is +1-484-630-8751. The password for the conference call is Compuware. A conference call replay will also be available. For more information, visit the Compuware Corporation Investor Relations web site at http://www.compuware.com/ . Press Contact Lisa Elkin, Vice President, Corporate Communications and Investor Relations, 313-227-7345 Certain statements in this release that are not historical facts, including those regarding the Company's future plans, objectives and expected performance, are "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. While we believe any forward- looking statements we have made are reasonable, actual results could differ materially since the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in the Company's reports filed with the Securities and Exchange Commission. Readers are cautioned to consider these factors when relying on such forward-looking information. The Company does not undertake, and expressly disclaims any obligation, to update or alter its forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. COMPUWARE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) AS OF DECEMBER 31, ASSETS 2004 2003 CURRENT ASSETS: Cash and cash equivalents $419,567 $367,199 Investments 194,719 175,043 Accounts receivable, net 431,701 427,433 Deferred tax asset, net 34,233 33,450 Income taxes refundable, net 23,578 21,848 Prepaid expenses and other current assets 24,756 16,991 Building - available for sale 19,702 Total current assets 1,148,256 1,041,964 INVESTMENTS 122,481 117,386 PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 424,524 427,561 CAPITALIZED SOFTWARE, LESS ACCUMULATED AMORTIZATION 55,715 44,220 OTHER: Accounts receivable 250,973 244,228 Deferred tax asset, net 15,676 57,194 Goodwill 297,108 213,083 Other 36,104 25,718 Total other assets 599,861 540,223 TOTAL ASSETS $2,350,837 $2,171,354 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $25,730 $28,194 Accrued expenses 188,631 196,584 Deferred revenue 293,176 263,589 Total current liabilities 507,537 488,367 DEFERRED REVENUE 339,140 291,542 ACCRUED EXPENSES 18,890 18,798 Total liabilities 865,567 798,707 SHAREHOLDERS' EQUITY: Common stock 3,873 3,842 Additional paid-in capital 738,165 715,071 Retained earnings 730,871 647,193 Foreign currency translation adjustment 12,361 6,541 Total shareholders' equity 1,485,270 1,372,647 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,350,837 $2,171,354 Note: Certain amounts in prior periods have been reclassified to conform to the current presentation. COMPUWARE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) QUARTER ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, 2004 2003 2004 2003 REVENUES: Software license fees $98,996 $80,678 $218,761 $195,361 Maintenance fees 108,658 102,940 316,930 303,913 Professional services fees 122,881 134,567 377,365 427,676 Total revenues 330,535 318,185 913,056 926,950 OPERATING EXPENSES: Cost of software license fees 5,403 8,285 21,289 23,328 Cost of professional services 105,734 123,767 337,518 399,814 Technology development and support 33,907 41,640 115,587 124,398 Sales and marketing 84,441 82,117 234,496 227,167 Administrative and general 48,321 50,245 148,735 158,074 Total operating expenses 277,806 306,054 857,625 932,781 INCOME (LOSS) FROM OPERATIONS 52,729 12,131 55,431 (5,831) OTHER INCOME 5,191 4,988 13,675 14,735 INCOME BEFORE INCOME TAXES 57,920 17,119 69,106 8,904 INCOME TAX PROVISION (BENEFIT) 16,218 (4,706) 19,350 (7,006) NET INCOME $41,702 $21,825 $49,756 $15,910 DILUTED EPS COMPUTATION Numerator: Net income $41,702 $21,825 $49,756 $15,910 Denominator: Weighted-average common shares outstanding 387,211 384,090 386,475 382,550 Dilutive effect of stock options 1,609 1,852 1,785 1,753 Total shares 388,820 385,942 388,260 384,303 Diluted EPS $0.11 $0.06 $0.13 $0.04 COMPUWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) NINE MONTHS ENDED DECEMBER 31, 2004 2003 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income $49,756 $15,910 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 43,654 39,994 Tax benefit from exercise of stock options 372 175 Issuance of common stock to ESOP 4,872 Acquisition tax benefits 5,406 5,275 Deferred income taxes 11,397 804 Other 2,015 3,012 Net change in assets and liabilities, net of effects from acquisitions: Accounts receivable (6,634) 144,406 Prepaid expenses and other current assets (2,341) 876 Other assets 1,968 5,204 Accounts payable and accrued expenses (24,936) (6,984) Deferred revenue 6,908 (72,429) Income taxes 10,362 (10,947) Net cash provided by operating activities 102,799 125,296 CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of: Business (104,993) Property and equipment: Headquarters facility (7,073) (50,497) Other (15,628) (5,500) Capitalized software (16,431) (9,165) Investments: Proceeds 157,927 275,344 Purchases (164,953) (302,353) Net cash used in investing activities (151,151) (92,171) CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Net proceeds from exercise of stock options 1,283 1,179 Contribution to stock purchase plans 6,111 6,468 Repurchase of common stock (996) Net cash provided by financing activities 7,394 6,651 EFFECT OF EXCHANGE RATE CHANGES ON CASH 5,609 7,957 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (35,349) 47,733 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 454,916 319,466 CASH AND CASH EQUIVALENTS AT END OF PERIOD $419,567 $367,199 Note: Certain amounts in prior periods have been reclassified to conform to the current presentation. COMPUWARE CORPORATION AND SUBSIDIARIES OPERATIONAL HIGHLIGHTS (dollar amounts in thousands) QUARTER ENDED QUARTER ENDED DEC. 31, DEC. 31, YR-YR SEPT. 30, QTR-QTR 2004 2003 % Change 2004 % Change License Fees: Distributed Product License Fees DevPartner $4,157 $6,901 (39.8%) $3,929 5.8% QACenter and File-AID Client/Server 7,150 6,173 15.8% 5,961 19.9% UNIFACE and Optimal 5,080 5,496 (7.6%) 3,295 54.2% Vantage 11,544 11,610 (0.6%) 7,635 51.2% IT Governance 2,900 - N/A 1,657 75.0% Total Distributed Product License Fees 30,831 30,180 2.2% 22,477 37.2% Mainframe Product License Fees 68,165 50,498 35.0% 43,185 57.8% Total License Fees 98,996 80,678 22.7% 65,662 50.8% Maintenance Fees 108,658 102,940 5.6% 104,771 3.7% Total Products Revenue $207,654 $183,618 13.1% $170,433 21.8% Total Mainframe Products Revenue $151,885 $135,943 11.7% $126,096 20.5% Total Distributed Products Revenue $55,769 $47,675 17.0% $44,337 25.8% Total Products Revenue by Geography North America $114,237 $97,003 17.8% $95,644 19.4% International $93,417 $86,615 7.9% $74,789 24.9% Product Releases Mainframe 4 4 0.0% 2 100.0% Distributed 9 16 (43.8%) 6 50.0% Total Costs of Software Products $123,751 $132,042 (6.3%) $128,188 (3.5%) Professional Services Professional Services Revenue $122,881 $134,567 (8.7%) $125,035 (1.7%) Contribution Margin 14.0% 8.0% 9.7% Billable Headcount 3,884 4,707 (17.5%) 3,949 (1.6%) Total Company Headcount 8,109 9,097 (10.9%) 8,446 (4.0%) Source: Compuware Corporation CONTACT: Lisa Elkin, Vice President, Corporate Communications and Investor Relations of Compuware Corporation, +1-313-227-7345 Web site: http://www.compuware.com/ Company News On-Call: http://www.prnewswire.com/comp/112310.html ------- Profile: International Entertainment